PAG Consortium Takes Control of Wanda Mall Management Business

A consortium of investors led by private equity giant PAG has taken control of troubled mainland developer Wanda Group’s mall management unit, nearly six months after announcing an $8.3 billion buyout of the business.

The Hong Kong-based investment firm co-founded by financier Shan Weijian has installed one of its top executives at the helm of Newland Commercial Management, the holding company of Zhuhai Wanda Commercial Management which manages 496 Wanda shopping malls across China, according to Chinese corporate registry records, with other members of the consortium also taking seats on the board.

The board shuffle, which came into effect on 2 September, saw David Wong, president of PAG China and co-head of PAG’s private equity business, replace Wanda executive Xiao Guangrui as chairman and legal representative of Newland. Newly appointed directors from Citic Capital, the Abu Dhabi Investment Authority (ADIA), and Mubadala Investment Company also took seats on the board after joining the consortium which acquired a 60 percent stake in Newland from Wanda Group.

“This investment reflects the expectation and recognition of Newland’s long-term growth potential by international institutional investors,” Wong said in a March release announcing the acquisition. “We like the competitive edge and first mover advantage that Newland has built and we think these advantages will allow it to generate stable and growing cash flow to investors.”

New Directors

Newland’s boardroom expansion saw the addition of Citic Capital’s Ye Xin and Chen Qi; ADIA’s Hao Lei and Hu Zhengwei; and Mubadala’s Philip Bao Yifei as directors alongside Wanda executives Han Xu, Huang Guobin, He Qicong, Xiao Guangrui and Zhang Chunyuan. Los Angeles-based Ares Management, which also participated in the consortium through its managed funds, does not hold any directorships.

Newland was formed in January after the consortium in December agreed to the framework of the investment. Dalian Wanda Commercial Management, the entity controlled by Wanda founder Wang Jianlin that serves as the primary holding company for the group’s commercial and hospitality assets, retained a 40 percent interest in Newland as part of the transaction.

Corporate records also indicate that Newland’s registered capital increased to RMB 40.5 billion from RMB 16.2 billion, with a total investment of RMB 51.3 billion. In addition to entities of the consortium, Newland’s updated shareholder roster also includes Suzhou Niuda Enterprise Management Consulting Partnership, a vehicle ultimately controlled by entities of the Suzhou municipal government.

Wong has also replaced Xiao as chairman and legal director of Zhuhai Wanda Commercial Management, with Xiao now listed as a director and executive of the Newland subsidiary. Representatives from Citic Capital, ADIA and Mubadala also joined Zhuhai Wanda as directors, while several Wanda executives were reshuffled. The changes came into effect on 4 September, according to corporate records.

Ready for Returns

The consortium’s takeover of Wang’s mall empire follows four failed attempts by Wanda to list its shopping centre management business on the Hong Kong exchange, after the group took out $5.9 billion in pre-IPO financing from investors including PAG in 2021.

Despite Wang’s inability to achieve his stock market goals, Dalian Wanda Commercial Management ranked as China’s largest commercial developer in 2023 with operating income of RMB 47.3 billion ($6.7 billion), according to data from China Real Estate Information Corporation.

The primary source of that revenue was the malls managed by Zhuhai Wanda Commercial Management, and now Newland, with Wanda’s 2023 turnover nearly double the RMB 25.2 billion in operating income achieved by number two commercial developer China Resources Land.

PAG disclosed in the announcement that since the consortium, including PAG, CITIC, Ares and other investors, provided the pre-IPO financing for Zhuhai Wanda three years ago, the business generated net profit of $800 million in 2021, $1.1 billion in 2022, and $1.3 billion in 2023, representing an annual growth rate of approximately 32 percent.

The mall portfolio managed by Newland spanned around 70 million square metres (753 million square feet) of space across 230 Chinese cities with more than 100,000 tenants as of March.

Cash Crunch

The boardroom changes come as Wanda continues to offload assets to ease its liquidity pressure. Dalian Wanda Commercial Management reported RMB 137.6 billion of interest-bearing liabilities as of 30 June, of which RMB 30.3 billion were due within a year, compared to cash and cash equivalents of just RMB 10.5 billion.

Divestments since last year include a Beijing office building that serves as Wanda’s headquarters, the Wanda Reign on the Bund hotel in Shanghai, a set of Wanda Plaza malls across Shanghai, Guangdong, Jiangsu, Zhejiang, Qinghai, as well as a controlling stake in its film business.

Bloomberg reported in May that PAG is considering buying Wanda Group’s portfolio of malls, citing people familiar with the matter. The potential transaction could see PAG raising a fund and bringing in other investors for a transaction that could value the assets at as much as RMB 100 billion ($13.8 billion).