The Dalian Wanda Group, China’s largest commercial property company, is preparing to sell off $9.3 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. Sunac stands to benefit from gaining a vast portfolio of tourism developments.
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. This is not out of character for Wanda, which as of Feb. 29, 2016 began an asset-light strategy similar to many U.S. hotel companies via its agreement with Baicheng Real Estate Group.
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Now, Wanda is slowly 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.
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Beijing has encouraged the development of cultural theme parks to drive local tourism, but China is currently home to more than 300 such facilities, with the lion’s share struggling to succeed. Wanda did not give a concrete reason for its portfolio sale to Sunac, but local Chinese business magazine Caixin suggested the sale may have taken place to alleviate the debt burden on the company’s property unit. With lower debt, it’s possible Wanda could be after a listing for its unit in Shanghai, or even a higher company valuation.
As for investments, Wanda has $44 billion set aside for its planned cultural and tourism projects, and has been investing in entertainment, leisure and financial business. The company signed deals with U.S. cinema chain AMC Entertainment Holdings, Hollywood film studio Legendary Entertainment, Infront Sports & Media AG and Atletico Madrid, a Spanish soccer team. The company has been spending so much, in fact, that news of a new luxury hotel brand in 2015, Vista, prompted scrutiny from regulators, and in 2016 the company made the largest ever real estate investment in the city of Chicago at $900 million. However, at $9.3 billion the company's most recent sale is setting a new definition for the term "asset light," and it will be interesting to see where Wanda spends its money next.