A pair of mainland developers — cash-strapped China Oceanwide Holdings and distressed-asset enthusiast Sunac China Holdings — have seen their interests converge once again, with Sunac agreeing to buy two of Oceanwide’s Hangzhou properties for RMB 2.2 billion ($340 million), according to an announcement to the Shenzhen stock exchange.
The two finished developments, Diaoyutai Hotel Hangzhou and Minsheng Financial Center, will change hands as Oceanwide struggles to complete two high-profile California projects and scrambles to raise cash as it deals with the debt challenges of its China Minsheng Group finance affiliate.
The two parties closed a similar deal in 2019, when Hong Kong-listed Sunac bought a pair of mixed-use projects — one in Beijing’s Chaoyang district and the other in Shanghai’s Huangpu district — from Oceanwide for RMB 12.6 billion.
In a Saturday filing, Shenzhen-listed Oceanwide said the latest transaction would help alleviate debt pressure, improve cash flow and help the company better carry out its operations, thereby contributing to the company’s sustainable development.
Picking Up the Pieces
Located in Hangzhou’s Qianjiang New City area, the 162-room Diaoyutai Hotel Hangzhou is a five-star accommodation offering panoramic views of the Qiantang River, according to Oceanwide’s website. In 2016 the property became part of the MGM Resorts network through the US hospitality chain’s China joint venture with Diaoyutai State Guesthouse.
The nearby Minsheng Financial Center, completed in 2014, is an 18-storey office building with 50,567 square metres (544,299 square feet) of space. The property is located near Chengxing Road station on Hangzhou’s metro line 4, and Oceanwide said that, under the terms of the agreement, it has an option to repurchase the assets from Sunac before 23 June 2022.
Oceanwide’s debt woes have intensified in recent months with 294 million shares in the Shenzhen-listed entity having been put up for sale on an Alibaba-managed website earlier this month as part of a court ordered auction on behalf of creditors. Ultimately, some 3.39 percent of the developer’s equity was sold off, with that auction taking place after a Beijing court had frozen 15.46 percent of Oceanwide Holdings in April due to a debt dispute.
In March, Oceanwide sold the Wuhan Courtyard Hotel along with another land parcel in the capital of Hubei province to China Cinda Financial Leasing for RMB 545 million.
Sunac, one of China’s most aggressive buyers on the secondary market, has developed a technique of scooping up assets that have outlived their usefulness to their owners. Led by chairman Sun Hongbin, the Tianjin-based developer has shown a distinct preference for expansion through acquisition. In this latest acquisition, Sunac is paying RMB 1.53 billion in cash for the Hangzhou assets while assuming responsibility for RMB 666 million in debt.
In addition to its dealings with Oceanwide, Sunac stepped up to buy Dalian Wanda Group’s 13 “Cultural Tourism City” theme park projects for RMB 43.8 billion in 2017, Wanda’s tourism management business for RMB 6.28 billion in 2018 and a CK Asset real estate project in Dalian for over RMB 4 billion in 2019.
Oceanwide, an acquisitive presence under former chairman Lu Zhiqiang, has gained notoriety in the US for two megaprojects begun in the middle of last decade that remain under construction amid delays and legal wrangling.
The $1.6 billion Oceanwide Center in San Francisco, featuring twin towers of 54 and 61 storeys, 1 million square feet (92,903 square metres) of office space, 265 residences and a 169-room Waldorf-Astoria hotel, broke ground in 2016. Since then the project has stalled out, investors have filed suit alleging mismanagement, and Oceanwide’s repeated attempts to sell the property have come up empty.
Meanwhile in downtown Los Angeles, the $1 billion Oceanwide Plaza is saddled with nearly $240 million in claims by contractors who say they haven’t been paid. The three-tower development, which began construction in 2015, had been expected to include a Park Hyatt hotel, 504 condo units and a 166,000 square foot shopping mall upon completion.