Wanda Commercial files for HK IPO

Intended to help fund major projects in Chinese mainland

Dalian Wanda Commercial Properties Co has filed an application for its IPO on the Hong Kong stock exchange, which analysts said Wednesday is intended to raise funds to support the firm's development in the Chinese mainland's oversupplied commercial property sector.

The real estate subsidiary of Chinese billionaire Wang Jianlin's Dalian Wanda Group did not give any details about the amount it planned to raise in a prospectus filed on the bourse late on Tuesday, but unnamed sources quoted by the Financial Times on Tuesday suggested a figure of $2 billion to $3 billion.

The largest IPO in the city so far this year is the $3.1 billion floating of HK Electric Investments Ltd, a trust spinoff from Li Ka-shing's business empire in January.

Calls to a Dalian Wanda PR representative remained unanswered by press time.

"Wanda Commercial has to pursue a long-term way to raise money from the stock market, as the company's capital chain has already been burdened amid the rapid expansion in the nation's money-burning commercial property industry," Song Ding, director of the tourism and real estate research center of the Shenzhen-based China Development Institute, told the Global Times Wednesday.

In the first half of the year, the company recorded net profit of 4.9 billion yuan ($797 million), down from 10.1 billion yuan over the same period in the previous year, according to the prospectus.

As of June 30, the assets of Wanda Commercial include 48 hotels and 89 shopping centers across China. The company has also made some overseas purchases, with the most recent being in August 8 when it spent $1.2 billion for a plot of land in Beverly Hills in the US.

It appears to be continuing its rapid expansion, planning to use 90 percent of the proceeds to further finance 10 property projects in cities including Harbin, Northeast China's Heilongjiang Province, and Tai'an, East China's Shandong Province, according to its filling.

It seems that the company has long been intending to get listed and lower its borrowing costs in overseas bond markets. It reportedly began preparing for the listing on the Chinese mainland's A-share stock market in 2009, but gave up the deal in July 2014 because the company had not been able to update its applications during the required period.

However, Song is concerned that Wanda Commercial's IPO might face a lukewarm reception in Hong Kong on its trading debut partly due to the Chinese mainland's oversupplied commercial property market.

"Currently, the commercial property industry in China is full of bubbles. And in 2015, bankruptcies will start to happen with some small-sized property operators," said Song.

A report by a Beijing-based RET Property Consultancy Ltd in July said that the occupancy rate of commercial properties such as shopping malls continued dropping in the second quarter, causing the China Retail Property Index to reach 103.4, down 5.7 percent from the previous quarter. A higher figure signifies the market performed better.

Wang Yongping, secretary-general of the China Commercial Real Estate Association, acknowledged that some of Wanda Commercial's development projects will be impacted amid the overall underperforming commercial property climate.

But he told the Global Times that Wanda Group's newly launched O2O (online to off-line) business will offset that negative influence to some extent.

According to information from Wanda Group's website, the group partnered with domestic Internet mammoths Baidu and Tencent to set up an O2O e-commerce company with a total investment of 5 billion yuan in the first phase.