Chinese Billionaire Sun Hongbin Enters Hotels and Tourism With $9.3 Billion Acquisition From Dalian Wanda 2

Sunac China is investing beyond residential property now

Sunac China Holdings Limited (HKEX: 1918) is one of the leading residential property developers in China (FXI) (YINN). Over the past few months, Sunac China has also been looking at opportunities beyond residential property to propel growth. In the past 6 months, Sunac has spent roughly $16 billion spread across 10 acquisitions, including a $2.2 billion yuan capital injection into cash-strapped Chinese media and tech company LeEco in January. The acquisitions are a part of the company’s intent to seek ways to diversify beyond property into other areas spanning, but not limited to, healthcare, finance, and natural resources.

The second largest real estate deal in China

In line with their intent to invest beyond residential real estate, billionaire Sun Hongbin’s Sunac China Holdings (HKEX: 1918) has now entered the hotels and tourism business. A $9.3 billion deal with the Dalian Wanda Group (DWNDF) (SSE: 0489737D), would “add a large number of prime land reserves and property assets for the company at a reasonable cost,” according to a statement released by the company on Tuesday, July 11.

Deeper introspection into Sunac’s debt positioning

There’s plenty of news around the developer’s buying spree since 2016. However, the Dalian Wanda acquisition being the second-largest real estate deal ever in China warrants deeper introspection. Sure, Sunac China’s shares have jumped over news of the hotel and tourism property acquisition from Dalian Wanda. However, with the Chinese regulator now making notable public moves on larger conglomerates regarding rising leverage, taking a closer look into Sunac China’s debt positions is imperative before getting too excited about the company’s expanding investment portfolio.  Even more so, considering Sunac China is preparing to assume all debt attached to the 91% stake in the Dalian Wanda assets it has agreed to purchase.

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Frontera looks into the Sunac China Holdings debt position, relative to its 21 peers in the industry in China (FXP) (CHAD), in the next part of this series.

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