Just over two years after spending $554 million to acquire Shenzhen-listed China Calxon Group, the mainland’s second-largest developer by sales may have finally found a use for the company once thought to give Xu Jiayin’s real estate giant a back-door route to a domestic stock listing.
Evergrande’s Calxon subsidiary disclosed on Friday that it has acquired two Beijing-based cinema companies — Startime and Amy Cinema — marking an apparent transformation of the development unit into a vehicle for expanding Evergrande’s cinema operating business.
The move by Shenzhen-listed China Calxon Group marks the latest diversification step by China’s second largest real estate developer, which announced a “New Evergrande, New Strategy, New Blueprint” concept at the start of this year.
Since then, Evergrande last month agreed to invest $2.1 billion in the world’s largest BMW dealer, buying a stake in Xinjiang-based Guanghui Group. In June the developer invested $2 billion in Jia Yueting’s Faraday Future electric car venture.
As part of this latest transation, Hangzhou-based Calxon also announced that it has transferred an RMB 355 million ($51.7 million) portfolio of real estate assets, including six ongoing projects.
Evergrande Ramps Up Cinema Business
Calxon announced on Friday, that it has completed the RMB 595 million acquisitions of 100 percent of Beijing-based Startime (RMB 565 million) and Amy Cinema (RMB 30 million) from Sino Life Insurance and Beijing Jingxi Tourism Development respectively.
“Through the acquisitions, the company will obtain a film distribution business license and enter the promising cinema industry,” said Calxon in its announcement.
Amy Cinema owns a national film distribution operation, although it does not currently own any cinemas. Meanwhile, Startime operates 42 cinemas in nine major cities across the country. These new theatres add to the 115 cinemas Evergrande Culture had in operation across China at end 2017, which was a 40.2 percent increase from the year earlier figure.
The bulk of these are IMAX cinemas the count of which is set to increase under an agreement forged in January between Evergrande and China Film which would open 200 new IMAX cinemas over the next five years.
Calxon Divests Real Estate Assets
On September 28, Calxon Group said in a separate announcement it is looking for a buyer for six ongoing real estate projects in Hangzhou, Chongqing, and Zhangjiagang, managed by five of its subsidiaries. Should the company succeed in finding a buyer willing to meet its asking price, Calxon would take in RMB 350 million from the asset sale.
Through the transaction, Calxon would be divesting 100 percent of its equity in Hangzhou Calxon City Binhong Real Estate Development, Hangzhou Mingcheng Boyuan Real Estate Development, Zhuji Calxon City Real Estate Development, Chongqing Huabai Real Estate Development, and 75 percent of the equity in Zhangjiagang Calxon City Real Estate Development.
According to the statement, sales have already commenced at all six projects, which include both residential and commercial space.
Evergrande Keeps Trying to Diversify
Evergrande Culture is part of Evergrande’s real estate division, with the group also operating tourism, health, high technology and insurance units.
In its interim report released last week, Evergrande said that it has “steadfastly transformed its development model this year: from ‘large scale’ to ‘scale + profitability’” with the shift from high debt, high leverage, high turnover and low cost to low debt, low leverage, low cost and high turnover “achieving remarkable results”.
The Shenzhen-based business also reported “smooth progress in business diversification”, including RMB 19.55 billion in contracted sales for Evergrande Tourism Group in 1H18.