China Vanke has agreed to purchase six real estate projects in the provinces of Zhejiang and Jiangsu, as well as in the city of Chongqing, from a subsidiary of China Evergrande Real Estate, for a total of RMB 355 million ($51 million).
The acquisition by Calxon Group was announced in a filing to the Shenzhen stock exchange on Friday, and came less than two months after the company had announced that it was looking for a buyer for the projects.
The sale by Evergrande, which ranked second among mainland developers in 2017, coincides with a move by the property giant to reposition Calxon Group as a entertainment specialist as the company headed by property mogul Xu Jiayin attempts to diversify its business under Xu’s “New Evergrande, New Strategy, New Blueprint” plan announced at the start of this year.
As part of this strategy, Calxon Group, which Evergrande acquired in 2016, has been selling off its residential and mainstream commercial projects this year to focus on building a chain of cinemas.
Evergrande’s diversification comes at an opportune moment for China Vanke, which with this deal in place, has spent a total of RMB 4.62 billion to acquire assets from other developers in the last month, as it seeks to rebuild its project pipeline and regain the position that it once held as China’s leading home-seller.
Acquiring Five Companies from Evergrande
According to Calxon Group, it has sold a majority stake in a set of five subsidiaries, which hold the six projects, to Hangzhou Jinlan Company, a wholly-owned unit of Shenzhen-based Vanke.
Through the transaction, Vanke would acquire 100 percent of Calxon’s 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 a 75 percent stake in Zhangjiagang Calxon City Real Estate Development.
The six target projects are based in the cities of Hangzhou and Zhuji in eastern China’s Zhejiang province, along with a project in the city of Zhangjiagang in neighbouring Jiangsu province, as well as in the western China municipality of Chongqing.
Together, the projects are approved for construction of 1.41 million square metres of homes and retail space, with at least 710,000 square metres remaining to be sold.
The announced compensation for the deal is on target with the RMB 355 million asking price that Calxon announced when it put the set of projects on the market at the end of September.
Evergrande Sets Up Calxon in the Movie Business
At the same time that Calxon Group put its housing developments on the market, the subsidiary of Evergrande also said that it had acquired a pair of cinema chains, in a drive to establish a nationwide network of theatres.
The cinema deal included Calxon buying 100 percent of Beijing-based Startime, which operates 42 cinemas in nine cities across the country, from Sino Life Insurance for RMB 595 million. At the same time, the developer also took over Amy Cinema, which distributes films nationwide, from Beijing Jingxi Tourism Development for RMB 30 million. The deals are seen as part of Evergrande’s stated goal of opening 200 new IMAX cinemas across China over the next five years.
In addition to its theatre business, Evergrande has also been investing in the auto sector, where it recently invested $2.1 billion in Xinjiang-based Guanghui, the world biggest BMW distributor and one of the major car sellers in China. Another car-related business, electric vehicle maker Faraday Future, has been less rewarding for Evergrande, with the company headed by mercurial entrepreneur Jia Yueting still battling with Evergrande for control of management.
Vanke Grows Pipeline Through Acquisitions
While Evergrande has been seeking to diversify, China Vanke is keen to replenish its depleted pipeline of new projects, after spending late 2016 and most of 2017 fending off a hostile takeover attempt by Shenzhen-based Baoneng Group and its affiliates.
Last week the developer announced plans to acquire the HNA Central Hotel Square development from in Guangzhou from debt-addled HNA. And, less than one month ago, Vanke acquired major stakes in five projects around Beijing from China Fortune Land Development for RMB 3.2 billion.
The company has also been competitive in land sales in recent months, spending RMB 546.8 billion to acquire land across China in the first ten months of this year. The spending on land buys ranks Vanke fourth among mainland developers after Country Garden, Evergrande and Sunac China, as smaller developers struggle to bid for land during the current slowdown in the mainland housing industry.