Major Chinese commercial property developer Dalian Wanda Group plans to sell 48 of its shopping malls to a joint venture led by Hong Kong investment firm PAG, continuing to shed assets to raise cash amid a slumping real estate market.
The joint venture of five companies, including a PAG subsidiary and China's Tencent Holdings, will acquire shares in 48 regional companies that back Wanda Plaza malls across China. The plans were revealed in a disclosure document dated May 20 from the State Administration for Market Regulation.
PAG, an alternative investment firm focused on the Asia-Pacific region, will establish a fund worth CNY50 billion (USD7 billion) to acquire 48 shopping malls from Chinese developer Dalian Wanda Group, according to a new report.
The 48 projects include Wanda Plazas in first- and second-tier Chinese cities, including Beijing, Guangzhou, Chengdu, Hangzhou, Nanjing, and Wuhan. The transaction was unconditionally approved on May 21.
After the deal is completed, the ownership of the shopping malls will be fully transferred, while Wanda Commercial Management will continue to oversee daily operations. The transaction will likely be finalized by June 30.
The 48 projects vary significantly in regional distribution and business formats, creating uncertainty in maintaining rental income, with annual return projected at 6 percent to 8 percent, the report cited analysts as saying. However, as subordinated financing and mezzanine arrangements hold lower repayment priority, underperforming returns could pressure investors financially, they added.
PAG will lead the fund platform, planning to inject CNY5 billion (USD700 million) to subscribe for subordinated shares of the fund, bearing primary risks while seeking excess returns, The Paper reported yesterday. A syndicate that includes big state-owned banks will provide CNY30 billion in loans, with the rest to be raised via mezzanine financing to attract diversified participants such as insurers and industrial funds.
PAG focuses on credit, market, private equity, and real estate. It operates 12 global offices and manages more than USD50 billion in assets for nearly 300 global institutional fund investors.
