Original title: Wanda Commercial Management Trust’s overdue causes the underlying agreement to expose a number of financial institutions to promote asset out of the balance sheet
The secret of Wanda Commercial Management’s realization of light assets was revealed due to the involvement of the trust overdue turmoil
Sun Shanshan
Around 2017, Dalian Wanda Commercial Management Group Co., Ltd. (formerly “Dalian Wanda Commercial Real Estate Co., Ltd.”, hereinafter collectively referred to as “Wanda Commercial Management”) cooperated with financial institutions such as CITIC Trust Zhujiang Life Minsheng Trust. The asset business has also begun to take shape.
Since then, Wanda Commercial Management has accelerated its transformation to the direction of light asset business. Then, with the overdue of related trust products, not only the secret agreement between Wanda Commercial Management and the trust company was exposed to investors, but it also triggered investors’ trust in Wanda Commercial Management. crisis.
The underlying protocol hides mystery
In 2017, Minsheng Trust established the “Zhixin No. 316 Wanda Plaza Investment Collective Capital Trust Plan” (hereinafter referred to as “Zhixin 316”), with a total scale of no more than 4.5 billion yuan, which will be used to subscribe for Beihai Wanda Plaza, Fuzhou Wanda Plaza, and Jiujiang Wanda Square, Ya’an Wanda Plaza, Liaoyang Wanda Plaza (hereinafter referred to as “5 Wanda Plazas”) project company equity, etc.
What investors did not expect was that “Zhixin 316” had overdue redemption since April 2021. As of press time, Minsheng Trust has not yet paid.
The reporter learned from the information disclosed by Minsheng Trust that in 2017, Minsheng Trust established “Zhixin 316”. The product has a period of 12-24 months, with continuous rolling issuance and maturity mismatches.
As of 2018, the trust product was subject to policy restrictions. On April 27, 2018, relevant departments issued the “Guiding Opinions on Regulating the Asset Management Business of Financial Institutions” (hereinafter referred to as the “New Asset Management Regulations”), emphasizing that financial institutions must not carry out or participate in rolling issuance, collective operation, and separate pricing features. For the fund pool business, it is pointed out that the liquidity risk management of maturity mismatch will be strengthened, and a three-year transition period will be given to achieve the proper exit of non-compliant products before the end of 2021.
“Zhixin 316” had not yet completed the rectification, and the sound of “explosive thunder” came. In April 2021, “Zhixin 316” investors reported that Minsheng Trust had overdue redemption. On July 13, Minsheng Trust issued an announcement stating that “Zhixin 316” did have liquidity problems. The funds in the trust account were not enough to pay the beneficiaries the trust benefits from January to June in 2021, and the redemption could only be deferred. At the same time, Minsheng Trust stated that it will realize the underlying assets.
In fact, since the release of the “New Asset Management Regulations”, in 2019, Minsheng Trust began to negotiate with a number of real estate companies, financial institutions, etc., hoping to sell 5 Wanda Plazas or other methods to achieve the effective exit of “Zhixin 316” investors .
However, the realization of the underlying assets of “Zhixin 316” did not go smoothly, and no company or institution is willing to take over.
In this regard, Minsheng Trust stated that the main problem is that the five Wanda Plazas are located in fourth- and fifth-tier cities. There are many restrictive clauses in the Investment Cooperation Agreement signed between Guan and Minsheng Trust.
*The screenshot is from the “Official Letter on Properly Doing a Good Job in the Exit of Asset Management Product Investors of Minsheng Trust Zhixin No. 316”
In September this year, the reporter obtained the above-mentioned “Investment Cooperation Agreement” and the supplementary agreement of the agreement, and noticed that Minsheng Trust and Wanda Commercial Management have made many secret agreements.
Among them, the third item of Article 7 of the Investment Cooperation Agreement stipulates that the legal representatives of the five Wanda Plaza project companies shall be appointed by Minsheng Trust or its related parties, but Minsheng Trust and its related parties shall ensure that the legal representative of the project company The person authorizes all rights and powers granted by the law and the project company’s articles of association to Wanda Commercial Management and its related parties at one time.
In the eyes of investors, through this agreement, Minsheng Trust is only the equity holder, and the management rights are still controlled by Wanda Commercial Management.
Bai Wenxi, chief economist of IPG China, believes that: “Minsheng Trust serves as the legal representative of the financier’s project company, but unconditionally delegates the legal representative’s rights to the financier’s Wanda Commercial Management, and the real management rights remain with Wanda. Controlling this arrangement does not constitute an equity holding relationship.”
“This is an arrangement of risk control measures to effectively control capital risks. While not interfering with the operation of the borrower’s project company, capital risks can be effectively controlled.” Bo Wenxi added.
In addition, the reporter checked the “Trust 316” “Trust Contract” and the “Investment Cooperation Agreement” supplementary agreement and found that they all mentioned “make up the difference.”
*The screenshot is from the “Supplementary Agreement of Investment Cooperation Agreement”
The so-called “make-up of the difference” means that Wanda Commercial Management provides the lowest guarantee of investment income. The return on investment of the net property income of the 5 Wanda Plazas has not reached the corresponding value, and Wanda Commercial Management assumes the obligation of compensation for the difference.
Kuang Yuqing, the founder of Lens Research, believes that “make up the difference” is to provide investors with some promises in disguise.
Bai Wenxi also pointed out: “’Bifi-filling’ is a risk control measure in the trust equity investment of trust borrowings and’clear stock real debt’ in the name of risk cover and fixed interest rate. The lender can ensure the expected rate of return while not taking operating risks, realizing the de facto and substantive creditorization of financing activities.”
“Pushing Hands” Behind the Light Assets
In 2015, Wanda Commercial Management started its asset-light business. In order to realize de-realization, Wanda Commercial Management sold its cultural and tourism companies, hotels, office buildings, etc. to other real estate companies, and transferred its real estate subsidiary to Wanda Real Estate Group Co., Ltd. (hereinafter referred to as “Wanda Real Estate”).
According to the Wanda Commercial Management Bond Annual Report, in July 2017, Sunac China (01918.HK) acquired 13 cultural tourism projects (14 project companies) including the Xishuangbanna Wanda Cultural Tourism Project, Nanchang Wanda Cultural Tourism Project, and Hefei Wanda Cultural Tourism Project The total transaction consideration is 43.844 billion yuan.
In the second half of 2017, Wanda Commercial Management and R&F Properties (02777.HK) signed an agreement to transfer 100% of the shares of 73 hotels and Dalian Wanda Center office building to R&F Properties at a total transfer price of approximately 18.96 billion yuan.
After the completion of the transfer, the aforementioned cultural and tourism projects, hotels, office buildings, etc. will no longer be included in the scope of Wanda Commercial Management’s consolidated statement.
At the same time, from 2017 to 2020, Wanda Commercial Management also transferred all the equity of a number of real estate wholly-owned subsidiaries to Wanda Real Estate, such as Ma’anshan Wanda Real Estate Co., Ltd., Xi’an High-tech Wanda Plaza Co., Ltd., etc.
In addition to transferring the equity of its subsidiaries to real estate companies, Wanda Commercial Management also cooperates with financial institutions to achieve light assets. In the 2015 annual report, Wanda Commercial Management revealed that the cooperative mode of asset-light projects will be the main direction of Wanda Commercial Management’s asset-light projects in the future.
The information disclosed by Wanda Commercial Management shows that the so-called cooperative model of asset-light business, that is, Wanda Commercial Management introduces part of the newly built Wanda Plaza to investors in the form of asset packages. Not only can the investment be quickly recovered, but Wanda Commercial Management still manages this type of business. For Wanda Plaza, the rent is reasonably divided between investors and Wanda Commercial Management.
Taking the aforementioned “Zhixin 316” as an example, in the “Investment Cooperation Agreement”, Minsheng Trust and Wanda Commercial Management agreed that Wanda Commercial Management and its related parties shall enjoy 30% of the total net property income generated by the project. The remaining part of the project company will be retained by the investor (Minsheng Trust) or related parties through the project company, that is, Minsheng Trust and Wanda Commercial Management will share 7:3.
* “Zhixin 316” “Investment Cooperation Agreement”
The reporter noted that in addition to Minsheng Trust, CITIC Trust Co., Ltd. (hereinafter referred to as “CITIC Trust”), Zhujiang Life Insurance Co., Ltd. (hereinafter referred to as “Zhujiang Life”) and other financial institutions have also taken over several wholly-owned Wanda Commercial Subsidiary.
According to incomplete statistics from reporters, in 2017, CITIC Trust successively acquired a number of wholly-owned subsidiaries of Wanda Commercial Management, including 6 companies including Nantong Tongzhou Wanda Plaza Co., Ltd. After the equity change, CITIC Trust holds 100% of these companies. Also in 2017, Zhujiang Life took over all the equity of Wanda Commercial Management’s five wholly-owned subsidiaries in one go.
What role did financial institutions play in the process of realizing heavy assets out of the balance sheet? Is it the company’s habit to use financial institutions to release assets on the balance sheet? Regarding this question, the reporter of “China Science and Technology Investment” sent a letter to Wanda Commercial Management and contacted the relevant person in charge of Wanda Group. As of press time, no response has been received.
After a series of divestitures of heavy assets, Wanda Commercial Management’s assets gradually became “light”. According to the 2019 bond annual report, Wanda Commercial Management stated: “From January 1, 2020, the company will only engage in commercial property investment and operation management.”
However, the reporter learned from China Chengxin International Credit Rating Co., Ltd. that the proportion of Wanda commercial management light asset projects and cooperative projects is not high. As of March 2021, the number of Wanda commercial management light asset projects and cooperative projects totaled 99, while the company’s self-owned commercial properties reached 270. (“China Science and Technology Investment”)
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