Why did Sunac choose to withdraw from cooperation? After exiting, who will be responsible for the operation of this part of the asset?
Viewpoint Real Estate Network On September 10, Wanda Hotel Development Co., Ltd. issued an announcement stating that the company received a notice from Sunac China Holdings Co., Ltd. that it would terminate the contract with respect to 21 hotels owned by Sunac Group and managed by Wanda Hotels Group. Management agreement.
According to the new media of View Real Estate, the 21 hotels are located in Xishuangbanna (Wenhua), Nanchang (Wenhua + Jiahua), Hefei (Wenhua + Jiahua), Qingdao (Jiahua), Guangzhou (Wenhua + Jiahua) ), Wuxi (Wenhua + Ka Wah), Chongqing (Wenhua + Ka Wah + Jinhua), Chengdu (Wenhua + Ka Wah), Guilin (Wenhua + Ka Wah), Kunming (Wenhua + Ka Wah).
The hotels co-hosted by Sunac and Wanda Hotels are mostly the Wenhua and K. Wah series, which belong to the second-ranked luxury brand and the third-ranked ultra-high-end brand respectively.
According to Sunac’s notice, the main reason for the termination of the cooperative trusteeship was (among other things) the impact of the new crown epidemic and the adjustment of Sunac’s business strategy in China.
Regarding the transaction between Sunac and Wanda Hotels, it should be traced back to the M&A case that shocked the industry four years ago.
The transaction history of the century worth 65 billion
On July 10, 2017, Sunac issued an announcement stating that it plans to take over 13 cultural tourism projects and 76 hotels under Wanda with 63.2 billion yuan. Among them, 13 cultural and tourism projects were valued at 29.575 billion yuan, while Sunac took on project loans, and 76 hotel projects were valued at 33.595 billion yuan.
However, Sunac is not very interested in this part of the hotel assets. Sun Hongbin, who has always been good at mergers and acquisitions, has more ideas about the accumulation of more than 30 billion funds. But for Wanda, it must be sold. If Sunac refuses to accept it, it needs a third party who is rich and willing to develop hotels.
On July 19, 2017, on the 7th floor of Beijing Wanda Sofiat Hotel, a mysterious third party appeared at the venue, namely Li Silian, co-chairman of R&F. After a fierce tripartite game, the background board even experienced a change from “Wanda Commercial Sunac China R&F Properties Strategic Cooperation Signing Ceremony” to “Wanda Commercial Sunac China Cooperation Signing Ceremony”.
In the end, R&F returned to the negotiating table and finally signed a tripartite agreement.
According to market news, Sunac has made concessions. According to the final agreement, Sunac will include 13 Wanda cultural tourism projects in Xishuangbanna, Nanchang, etc., with a price of 43.844 billion yuan, and the project will assume all existing loans of approximately 45.4 billion after the delivery. Yuan, 14.269 billion yuan higher than the previous price, a premium of nearly 50% compared to the first quotation.
This part of the extra price was used to fill the price difference between R&F’s acquisition of 77 hotels. The original price of more than 33.5 billion yuan in hotel assets, R&F ended up spending “only” 19.906 billion yuan.
At that time, the market-recognized winner, apart from Wanda, which successfully cashed out tens of billions and cleared tens of billions of debts, was R&F, which spent less than 20 billion “leaving” 77 hotels and became the world‘s largest hotel owner.
However, looking back now, R&F seems to have become the only loser-this “asset-heavy” transaction has dragged down R&F’s financial system. Recently, it is facing a double kill of stocks and debts. Rating agencies such as Fitch and Standard & Poor’s have downgraded. Rating.
With the help of this transaction, Wanda has also achieved a light asset transformation.
At that time, Hongbin Sun stated on the scene that Wanda Commercial and Sunac agreed to maintain the “four unchanged” cultural tourism projects after the delivery, namely, the brand remains unchanged, the planning content remains unchanged, the project construction remains unchanged, and the operation management remains unchanged. Holding properties continue to use the Wanda brand, and Wanda will continue to be responsible for the design, construction, and operation and management after completion, while Sunac is responsible for the design, construction, sales and post-delivery management of the sales properties.
At the same time, after the hotel is delivered, the hotel management contract will continue to be implemented and will be managed by Wanda until the contract expires.
In other words, Sunac’s breakup with Wanda Hotel this time is tantamount to tearing up the previous agreement and the latter needs to be compensated. However, the specific amount is still being negotiated by both parties and has not been disclosed.
It is worth noting that on October 29, 2018, Sunac China acquired the corresponding equity of Wanda Cultural Management and Wanda BVI Cultural and Creative for RMB 4.494 billion and HKD 1.5 billion respectively. At the same time, Wanda Commercial Management Group agreed to terminate the original commercial arrangement at a cost of approximately 287 million yuan.
In addition, Sunac China has the right to change its name at any time according to the operating arrangements of the “Wanda” words that are being used in all property holding areas such as parks and businesses.
The question is whether this part of the hotel belongs to the relevant property in the contract, and the final price of both parties for breach of contract.
Wanda is out of Sunac to personally end?
What is even more curious is why Sunac chose to withdraw from cooperation? After exiting, who will be responsible for the operation of this part of the asset?
Some insiders pointed out that when real estate companies choose to hand over their hotel assets to professional hotel management groups for custody, they need to pay a lot of management fees and brand usage fees every year. This is a big deal for real estate companies nowadays. Pen can save money.
On the other hand, real estate companies handed over to professional teams for management in order to obtain better business returns. Since last year, the hotel industry affected by the epidemic has inevitably suffered a major impact.
For these real estate companies, the effect is not as expected, and they have to pay for it. It is better to try to recover to find a better option for asset appreciation and return.
In the first half of this year, Sunac’s cultural tourism revenue was approximately 2.61 billion yuan, a year-on-year increase of approximately 166.3%; management profits reached approximately 440 million yuan; passenger traffic reached approximately 72.01 million, a substantial increase of approximately 102.9% year-on-year.
It was written on the official website of Sunac Cultural Tourism that Sunac Hotel has nearly 150 hotels in Sunac Cultural Tourism City and non-cultural Tourism City projects that have opened or planned to open. A number of self-operated hotel brands will be built in Guangzhou, Guilin, Suzhou and Chengdu, and will be located in cities and regions such as Nanchang, Wuxi, Suzhou, Hainan, Wuhan, Shaotong and Weihai.
At the same time, Sunac Hotel is positioned as a full-function asset manager and brand operator with pan-accommodation business as the core, opening up the entire industry chain model of pan-accommodation business planning, preparation, operation, reconstruction, and exit.
Generally speaking, real estate companies generally have three choices for the management of hotel assets.
First of all, real estate companies can self-operate their hotels by setting up their own brands and teams. This is the most cost-saving and most likely choice for cultivating excellent teams.
Secondly, like choosing Wanda Hotels for hosting, choose some large hotel groups such as China Lodging, InterContinental, Hilton and other large hotel groups for management-but this possibility is not great for Sunac.
Third, the real estate enterprise will establish a joint venture company with the hotel group, and this part of the joint venture company will operate the hotel assets.
A cooperation in the first half of this year is worthy of attention.
On March 22, the strategic cooperation conference between Huazhu Group and Sunac Cultural Tourism Group was held in Changsha. The two parties announced the establishment of a joint venture company-Yongle Huazhu Hotel Management Co., Ltd.
In the equity structure of Yongle Huazhu, Huazhu accounts for 50% of the shares, and Sunac Cultural Tourism and strategic partner Times Global jointly hold 50% of the shares. Huazhu Group authorized the future development and operation of its brands such as Shibaige and Huajiantang to the joint venture company Yongle Huazhu, while Sunac Cultural Tourism authorized its Jinshan and other brands to Yongle Huazhu.
In the future, the hotel brands operated by the joint venture will mainly focus on two areas of business travel and cultural tourism, including high-end and luxury brands such as Shi Boge, Shi Boge Grand View, Huajiantang, Yongle Banshan and Songpin. The joint venture company will open up cooperation to the entire industry. It is expected that 200 hotels will be signed within 5 years, of which more than 100 will be opened.
If the next part of the hotels is hosted by Yongle Huazhu, a joint venture between Huazhu and Sunac, it means that Sunac was not satisfied with the hotel development last year and tried to find a better solution at the beginning of the year.
Source: Wanda Hotels Annual Report 2020
From the above comparison, it can be found that the occupancy rate of Wanda Hotels’ high-end hotels has dropped by more than 18%, while Sunac’s managed hotels are all high-end and above hotels, which is obviously not as expected.
At the same time, Sunac also hopes to get a share of these management industries. If this part of the brand can successfully pass the successful operation of its hotels, and finally achieve external export, it is a very ideal business for Sunac.
