RMB 16B Western China Deal Makes Sunac Owner of World’s Biggest Building

Sunac China Holdings has racked up RMB 16.31 billion ($2.32 billion) in land and property acquisitions in less than two weeks, extending a buying binge in second-tier cities and further boosting the Tianjin-based developer’s outsize project pipeline.

On 6 December, a Sunac announced that a subsidiary of the company had agreed to pay RMB 1.04 billion ($148 million) for a unit of financially troubled developer Overseas Chinese Town (OCT) which carries the rights to a planned 57.28 hectare cultural tourism destination in Chengdu, capital of Sichuan province.

The Chengdu deal came shortly after Sunac late last month agreed to shell out RMB 15.27 billion for a majority stake in a pair of companies which control 30.72 million square metres of real estate projects focused in southwest and central China, including a Chengdu mega-development that ranks as the world’s largest building.

New Deal in Ancient Town

In its most recent acquisition from a distressed developer, Sunac has agreed to acquire a 51 percent interest in Overseas Chinese Town’s Chengdu Dirun Real Estate subsidiary, giving it control of a tourism project which is planned to include a museum complex that showcases Hakka history and culture, a pedestrian shopping street, artist workshops, and five-star hotels.

Following the transaction, which was made after Overseas Chinese Town had posted a notice of the project stake’s availability to the Beijing Equity Exchange, the Shenzhen-based developer will retain 49 percent of the project company. As of September 30, 2018, the target company had total assets of RMB 784 million and total liabilities of RMB 381 million.

State-backed OCT, which made its name as the developer of the Shenzhen-based Window of the World theme park, reportedly put Chengdu Dirun on the market last December at a reserve price of RMB 1.042 billion, after struggling with cash flow challenges.

According to Chinese media accounts, Chengdu Dirun owns multiple land parcels totaling 57.28 hectares in Chengdu, including the planned cultural tourism project located 17 kilometres east of downtown. The project forms part of Luodai Ancient Town, home to a historic ethnic Hakka community in Chengdu’s Longquanyi district.

OCT’s sale of its stake in the Chengdu company was announced two days after OCT was revealed to have sold a 50 percent stake in its long-stalled Suhewan Central Park project in Shanghai for RMB 4.71 billion ($670 million) to Stanley Ho’s Shun Tak Holdings and China Enterprise Company Ltd.

Sun Buys Land Bank and Mega-Projects

The Chengdu purchase followed a mega-deal in which another branch of the developer helmed by Sun Hongbin, Sunac Southwest Group, agreed to buy a 51 percent stake in two companies held by developer Yunnan Metropolitan Construction Investment Group (YMCI), according to a 27 November filing to the Hong Kong stock exchange.

The pair of firms hold a portfolio of around 30.72 million square metres of real estate projects primarily in southwest and central China, including Century City New International Convention & Exhibition Center (CCNICEC), a multi-building exhibition facility in Chengdu’s Chengnan New District.

Also included in the portfolio is New Century Global Center, a multipurpose building in the city’s Tianfu New Area that measures 1.76 million square metres, making it the largest building in the world by floor area. YMCI had recently taken over the two properties, according to media accounts of the deal.

The pair of Chengdu mega-projects are part of the target portfolio of 18 projects from across the apartment, hotel, office, retail and amusement park segments totalling 30.72 million square metres of space in Chengdu, Wuhan, Changsha, Kunming, Xishuangbanna and surrounding areas. The saleable portion of the assets totals around 27.72 million square metres or about 90 percent of the overall portfolio, and the unsold gross floor area measures about 23.9 million square metres.

In addition, the YMCI subsidiaries have a potential land bank representing 66.59 million square metres of gross floor area, including 35.87 million square metres which the companies intend to acquire.

“Through the transactions, the group obtained a large amount of high-quality bank at a reasonable land price, which will strongly support the group’s stable and healthy development in the future,” Sunac said in the announcement. “In addition, the target companies have years of experience in the operation and management of convention centre, exhibition centre and cultural tourism, and has formed a good reputation and brand.”

In a follow-up announcement on December 5, the company noted that Sunac Southwest Group had established a limited partnership with YMCI subsidiary Yunnan Province Water Industry Investment, in which Sunac agreed to commit RMB 4 billion by year-end.

Second-Tier Buying Frenzy Continues

The deals come near the end of a busy year for Sunac, which in 2018 ranked as China’s fourth-largest property developer by sales. In October, the company chaired by Sun Hongbin reportedly snapped up an unfinished residential and commercial project in the northeastern city of Dalian from CK Asset Holdings for over RMB 4 billion ($560 million).

That followed Sunac’s purchase of a residential plot in Shanghai’s suburban Qingpu district from the city government a total of RMB 3.09 billion ($430 million) in late September. Sunac also picked up a set of three projects in eastern China from financially troubled Xinhu Zhongbao in July, agreeing to pay RMB 6.7 billion ($970 million) for majority stakes in the residential developments.

Caixin reported in April that Sunac had already spent a total of RMB 66.5 billion buying 78 parcels, among them 67 plots located in second-tier cities, during the year to date. That included the developer’s purchase of four plots of residential and commercial land in Wuhan, capital of Hubei province, for RMB 15.2 billion ($2.26 billion).

Sunac cemented its reputation as a cultural tourism enthusiast in October of last year, when the company confirmed its purchase of Dalian Wanda Group’s tourism management business for RMB 6.28 billion ($902 million). That deal followed Wang Jianlin’s 2017 sale to Sunac of Wanda’s 13 “Cultural Tourism City” theme park projects for RMB 43.8 billion.