Singaporean developer CapitaLand announced Thursday that it had spent RMB 501 million ($78.5 million) to acquire the remaining 50 percent interest in a tech park in northeastern China from its financially troubled business partner.
The Temasek-controlled giant is buying the half-stake in Dalian Ascendas IT Park from Hong Kong-listed Yida China as it continues to pursue its interest in technology-linked properties in China, just one month after buying a hyperscale data centre in Shanghai.
Yida, which has seen the pandemic add to distress inflicted by the 2019 defaults of its parent firm, China Minsheng Investment Group (CMIG), indicated that it is selling its half of the 342,409 square metre (3,685,660 square foot) project due to financial concerns.
“The outbreak of COVID-19 has had negative impacts on the Group’s sales of properties business,” the company said in a statement to the Hong Kong exchange. “The Disposal will enable the Group to quickly recover funds and make up for the short-term liquidity shortage.”
CapitaLand said it is buying the project stake based on the adjusted net asset value as of 31 March 2021. Last year the project had revenue of RMB 149.5 million and an after-tax loss of RMB 25.2 million. In 2019 it had lost RMB 27.7 million.
At the stated consideration, CapitaLand is paying roughly RMB 2,926 ($458) per square metre of GFA for the asset, which has a leasehold set to expire in 2055.
The office complex in Liaoning province’s Dalian Software Park was originally undertaken in 2005, with the partners expecting to invest $62 million in the development. Yida and Ascendas were the original partners before the Singapore firm became part of Ascendas-Singbridge, which merged with CapitaLand in 2019.
Under the terms of the deal, Yida has a call option that can be exercised to buy back the stake within six months of the conditional equity transfer agreement. The call option is meant to provide the seller with six months to settle its internal affairs; if the option is left unexercised, CapitaLand will continue to have full control of the property, the company said in a filing with the Singapore Exchange.
Yida has suffered a cash crunch since April 2019 after a financial crisis at its parent firm led the business park operator to default on loans with outstanding principal of RMB 8.75 billion.
New Economy Focus
With the completion of the acquisition, DLSP-Ascendas is now a wholly-owned subsidiary of CapitaLand, which has made tech assets a pillar of its mainland China strategy.
Last November, CapitaLand revealed plans to redeploy part of the capital from its recent asset sales into investment in new-economy assets, with an aim to increase its China exposure in the sector to $3.7 billion over the next few years.
The acquisition comes on the heels of last month’s announcement that CapitaLand would acquire its first hyperscale server facility in China, spending RMB 3.66 billion to pick up a four-building campus in Shanghai’s Minhang district.
Yida’s Struggle for Solvency
Yida’s parent firm shocked China’s financial world in January 2019, when it missed a deadline to repay a RMB 3 billion bond. By February, CMIG declared that it was going through a “strategic transformation” and, as part of its new survival strategy, sold its 50 percent stake in a mixed-use project in Shanghai’s South Bund area to Greenland Group for RMB 12 billion as it scrambled for cash.
Following Yida’s April 2019 announcement of its default, CMIG found itself in deeper trouble, with that financial shortfall triggering a new $800 million crisis for the parent firm. Yida’s announcement had triggered a cross-default clause in two sets of offshore bonds issued by CMIG, a $300 million set of notes due in 2020 and a $500 million issue due in 2019.
On 19 April 2020, Yida again failed to repay about $53 million in bonds on time, though it later said it made the payment on 24 April after transferring the funds. The failure to redeem the 2020 notes on time had triggered a cross-default on onshore loans of up to RMB 9.8 billion.
The 2020 notes were left over from a March 2020 exchange offer, under which about $225 million in bonds were issued with a maturity date of 27 March 2022.