Pointlessly distressed

19 Apr 2018 By Christopher Beddor

Officials pushed the developer to shed assets to pay down debt, forcing it to scramble to stave off default. Buyers of its properties got discounts that let them book billions in quick profit. In retrospect, Beijing’s meddling looks more hapless than prudent.

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Dalian Wanda agreed in July 2017 to sell a portfolio of hotels and tourism projects to fellow developers Sunac China and Guangzhou R&F Properties for around $9.3 billion. The deal came shortly after China’s banking regulator ordered lenders to review their exposure to the conglomerate’s overseas projects.

S&P Global Ratings revised its outlook for Sunac China to “stable” from “negative” on expectations that the company’s leverage will improve this year. The ratings agency said the company’s “opportunistic” investments remain a risk. Among other investments, the agency cited its acquisition last year of some 13 cultural and tourism projects from Dalian Wanda Commercial Properties, which led to a significant increase in Sunac’s debt.

Property investment in China rose 10.4 percent year-on-year in the first quarter, the National Bureau of Statistics reported on April 17. Total land transaction values increased more than 20 percent during the period, even as the total land purchased increased only 0.5 percent.

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