Wanda to Sell 48 Malls to Ease Debt Woes

Dalian Wanda Group Co. Ltd., a major Chinese real estate and entertainment conglomerate led by Wang Jianlin, is selling 48 of its Wanda Plaza shopping malls across 39 cities to a consortium that includes Tencent Holdings Ltd., a unit of JD.com Inc., PAG Zhuhai, Sunshine Life Insurance Corp. Ltd., and a subsidiary of GoHigh Capital. This move is part of Wanda’s effort to tackle its persistent liquidity crisis by divesting assets and reducing debt [para. 1][para. 2][para. 3]. The 48 shopping centers are owned through individual companies under Dalian Wanda Commercial Management Group Co. Ltd., a subsidiary specializing in commercial property investment, development, and management [para. 2]. Key metropolitan areas such as Beijing, Shanghai, Guangzhou, Hangzhou, and Xiamen are among the locations of the properties being sold, as well as venues in smaller cities [para. 2].

PAG Zhuhai, a part of the Hong Kong-headquartered PAG investment group, leads the consortium. PAG has longstanding ties to Wanda and is also an investor in Zhuhai Wanda Commercial Management Group Co. Ltd. PAG previously became embroiled in a dispute with Wanda following the failed IPO attempt of Zhuhai Wanda [para. 3][para. 4]. In March 2024, PAG and partners acquired a 60% stake in Newland Commercial Management, the holding company of Zhuhai Wanda, while Dalian Wanda retained the other 40% [para. 5].

Wanda Group has been selling off assets for several years to decrease its enormous debt, accrued through aggressive real estate acquisitions both in China and internationally. In 2023 alone, it sold cinemas, shopping malls, and hotels to raise capital and attempted to renegotiate bond terms to delay payments. By the end of September, Wanda's non-current liabilities due within a year were approximately 40.1 billion yuan ($5.6 billion), while its available cash and equivalents were only 15.1 billion yuan, highlighting the severity of its liquidity constraints [para. 6].

Details regarding the financial terms of the mall sale or investor contributions have not been made public, nor has it been made clear how the deal is structured or funded [para. 7]. However, information obtained by Caixin indicates the buyers will set up a PAG-led fund to acquire the package of 48 malls, utilizing a pre-REIT (real estate investment trust) model [para. 8][para. 9]. A pre-REIT has a structure similar to a traditional REIT, collecting investment funds and acquiring property assets, but it may not fully comply with regulatory requirements and therefore does not receive the same tax or legal treatment; conversion to a publicly traded REIT may be possible later [para. 10][para. 11].

REITs anchored by shopping malls are increasingly attractive to investors as China places consumption at the forefront of its economic agenda. Wanda Plazas are designed as comprehensive shopping, leisure, and entertainment complexes, featuring retail, dining, hospitality, and occasionally residential spaces [para. 12]. Dalian Wanda owns nearly 300 Wanda Plazas, which collectively generate almost 10 billion yuan in rental income annually [para. 13].

Despite not defaulting amid China’s ongoing property sector turmoil, Wanda continues to struggle financially [para. 14]. Its liquidity challenges are exacerbated by repeated delays in the planned IPO of Zhuhai Wanda. Wanda had pledged to buy back investors’ shares for over 40 billion yuan, including an 8% annual return, if the IPO faltered. After four unsuccessful listing attempts, investors led by PAG agreed to reinvest following repayment of their original stakes by Wanda, helping reduce financial strain temporarily [para. 15][para. 16].