Guangzhou R&F Aims for 30% to 50% Profit Growth at Wanda’s Hotels

(Hong Kong) — Guangzhou R&F Properties Co. Ltd. aims to boost the profit from the hotels it agreed to acquire from Dalian Wanda Group by 30% to 50% in the near term, R&F President Li Sze-lim said.

Late June, in a revised deal, R&F agreed to take over Wanda’s 77 hotels for 19.9 billion yuan ($2.99 billion). The deal superseded a previous arrangement announced days earlier, in which Wanda would sell those hotels and 13 theme parks to Sunac China Holdings Ltd. for 63.17 billion yuan. In the end, Sunac agreed to acquire only the theme parks from Wanda, in part because investors and credit ratings agencies are concerned about its growing debt due to the massive purchase.

Wanda said earlier its 77 hotels on sale reported a combined profit of 873.7 million yuan in 2016, up 59% from 550.6 million yuan in 2015. On average, each hotel made a profit of around 11 million yuan last year.

R&F’s Li told reporters in Hong Kong that, based on those numbers, the profitability of those hotels was mediocre. But he believes, with the help of hospitality management from Wanda after the acquisition, profits could be increased by 30% to 50% in the near term.

He did not elaborate what measures would be taken or how much more of an investment would be needed.

Most of the hotels will be merged onto R&F’s balance sheet this year, Li said.

Li also said R&F made the decision to join the revised deal within a very short time. He said the companies spent half an hour negotiating — mainly on the price and transaction settlement — during an event that took place on July 14 and July 15. Both parties finalized the deal on June 19.

In a financial statement filed to the Hong Kong stock exchange on Tuesday, R&F said contracted sales increased by 30% to 38.81 billion yuan in the first half of 2017, buoyed by strong sales in third- and fourth-tier cities as Chinese policymakers focused on clamping down on real estate risks in the country’s largest cities.

R&F’s net profit increased by 2% to 2.48 billion yuan in the first six months ending June 30, and revenue dropped by 8.8% to 20.41 billion yuan. As for the segment of hotel operations, the net loss narrowed to 89 million yuan during the first half from 113.5 million in the same period in 2016.

Contact reporter Dong Tongjian (tongjiandong@caixin.com)