Cash-strapped Chinese tech giant LeEco is said to be telling creditors that it is close to scoring a major windfall on the sale of a Beijing mall to China Vanke as entrepreneur Jia Yueting scrambles for cash.
CFO Zhang Wei reportedly has told LeEco’s creditors that the company, which got its start in streaming TV before diving into smartphones and electric supercars, is in advanced negotiations to sell Beijing Shimao Gongsan Plaza to China’s second largest developer for RMB 4 billion, according to a report this week on mainland business news platform the Economic Observer.
Jia’s tech giant, which also invested heavily in commercial real estate, was first reported to have put the 50,000 square metre (538,000 square foot) shopping centre on the market in April. Since that time LeEco’s businesses have continued to show signs of distress, with the company laying off 325 US staff in May, and getting sued by its advertising agency for unpaid bills earlier this month.
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Zhang Wei has reassured creditors that, if the mall in Beijing’s Sanlitun area were sold successfully, then LeEco would be able to pay off its obligations and banks could potentially recommence lending to the struggling firm, according to the account, which was republished on mainstream mainland portals include Sina.com. Inquiries by Mingtiandi to China Vanke and LeEco went unanswered at the time of publication.
LeEco originally acquired Shimao Gongsan from developer Shimao Group last June in a RMB 2.97 billion ($424 million) deal, back when the company was still on one of China’s most aggressive acquisition sprees. By November of last year LeEco is reported to have already pledged the stock rights in the two companies holding the property to CITIC Bank.
Retail real estate experts familiar with the Beijing market who spoke with Mingtiandi indicated that LeEco’s price point for its Beijing property might represent hope as much as reality. “Even with central Beijing commercial assets in short supply, Shimao Gongsan doesn’t quite qualify as prime real estate,” the real estate investor told Mingtiandi. The source indicated that LeEco would be doing well if it could resell the department store-anchored mall for the same price that it purchased it for last year.
Anchored by the Shimao Department Store, the eastern Beijing mall is said to attract some 25,000 people daily. The location is within easy walking distance of Swire Properties’ successful Taikoo Li Sanlitun and is just north of Beijing’s Workers’ Stadium.
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It was just over a year ago that Jia Yueting, who founded LeEco in Beijing, was calling Apple outdated, but by last month Jia had resigned from his chief executive role at Leshi Internet Information and Technology – his group’s primary listed entity.
Things got tougher for Jia at the beginning of this month as a Shenzhen-listed ad agency, MIG Unmobi Tech, sued four of LeEco’s companies for RMB 61.6 million in delinquent payments, according to a statement by MIG to the stock exchange. Also this month, a company bond sale was cancelled as mainland regulators asked for more details concerning LeEco’s finances.
LeEco had already received a $2.2 billion cash bailout from mainland developer Sunac this January, but financial problems have continued to dog the company which once promised to make everything from supercars to smartbikes.
LeEco shut down its India operations earlier this year, and top team members are reportedly fleeing its Faraday Future electric supercar venture, which has also received complaints from creditors – and from the Nevada state treasurer.
Earlier this year, LeEco agreed to sell off a 49-acre site in Silicon Valley to another Chinese firm for $260 million, after buying what it hoped to be home base for its future US empire in June 2016 for $250 million.
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