Once a serial buyer, Chinese conglomerate Dalian Wanda Group is reportedly continuing to look for buyers of many of its holdings, a signal that the high-flying days of Chinese overseas acquisitions could be over.
According to the South China Morning Post, Wanda is seeking out a single buyer for five projects in the UK, the US and Australia and is hoping to sell them all in one shot for an estimated US$5 billion. The move comes as Beijing continues to thwart overseas investment by China-based companies. In August, China's State Council released a guideline "to promote healthy growth of overseas investment and prevent risks." Sectors on the restriction list include real estate, hotels, entertainment, sport clubs, outdated industries and projects in countries with no diplomatic relations with China.
How and if U.S. President Donald Trump's visit to China will affect this remains to be seen. In fact, and rather conversely, reports say that China will now ease restrictions on foreign ownership of financial services groups within China.
Wanda's latest potential offload, according to the SCMP, includes: One Nine Elms, a two-tower residential and hotel development currently under construction in London, which was acquired by Wanda from UK-based Green Property in 2013; Vista Tower in Chicago, which is slated to be completed in 2020 and was a joint investment with Magellan Development Group; One Beverly Hills, a US$1.2-billion luxury condominium and hotel complex in Beverly Hills, Calif.; One Circular Quay, in Sydney, which was set to include a Wanda Vista hotel; and the US$900-million Jewel project on the Gold Coast of Australia, a three-tower hotel and residential project.
Acquiring these assets will not be easy, made more difficult by the fact that they are still under development. Thomas Lam, head of valuation and consultancy at Knight Frank, told SCMP that, "The projects are under construction, so the new owner will need to send its own operational teams to complete the developments.
“They will find it difficult to channel capital outside China under the existing tightened capital controls,” said Lam. “They may have to devise ways to settle the transaction. The deal structure could be complicated and could possibly involve onshore and offshore assets swap.”
This is another instance of Wanda looking for the exit. In July, Wanda agreed to sell off more than $9.2 billion in hotels and tourism projects to Sunac China in a plan to lessen its debt load and slowly distance itself from the theme park business. In what is expected to become the second-largest real estate deal to ever take place in China, the sale is anticipated to create opportunities for Wanda to develop on China’s mainland after its property unit delisted from Hong Kong in 2016.
Wanda said in a statement that it is offloading 91 percent of 13 “cultural tourism projects,” a term usually reserved for theme parks and leisure complexes, as well as 76 hotels. After the sale, Wanda will retain an operating and managing relationship with the projects. Wanda is shedding select assets as it prepares to build at least 20 cultural projects around China, with company owner Wang Jianlin expressing his desire to lead a “wolf pack” of parks to surpass Walt Disney Co. Currently, three of Wanda’s parks are completed, with the rest under construction.
"This (deal) signifies a retreat from Wanda's previous strategy in cultural tourism, and marks a pivot to an asset-light strategy," Qin Gang, senior researcher at State Information Center, a government-linked think tank, said in a statement.
Meanwhile, in December of 2016, Wanda sold Madrid's Edificio Espana building, which it had planned to convert into a luxury hotel, to Spanish property developer Baraka Global Invest in a deal valued at €272 million euros.
There is no word on Wanda Vista Istanbul, a joint venture between Wanda and Turkey's Mar Yapi, which reportedly is set to open toward the end of 2018 and designed by Philippe Starck. It would mark the first Wanda hotel to open outside China.
Wanda's about-face is not unique. Other China-based companies are being compelled to look at the prospects of disposition. In late July, Chinese authorities reportedly asked Anbang Insurance Group, owner of the Waldorf Astoria in New York, whose chairman was detained in June, to sell its overseas assets. Nothing has happened as of now, and Anbang recently released news of the first phase of its renovation of the famed hotel.