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Vanke Business and SCPG’s Integration to Create Leading Business Platform in China

news of the group Publisher:  Date :2017-03-20

On the evening of March 17th, Vanke announced the widely anticipated business integration issue. Vanke Business will be integrated with SCPG, highlighting Vanke’s goal and ambition in commercial operation of creating a leading business platform in China.

Vanke said in the announcement that the company had clarified its positioning as a city supporting service provider and commercial real estate would be one of its key development directions in the new ten-year development strategy.

To improve the operation and management ability of commercial real estate rapidly, the company united other investors to purchase 96.55% of SCPG’s shares in 2016. d on SCPG’s mature business development and management ability, the company decided to position SCPG as Vanke’s business development and management platform. With the help of external capital strength, the company would implement the integration of stock resources to promote the development of commerce.

As of the end of 2016, Vanke has developed a total of 84 commercial real estate projects either by their own or together with partners, with the construction area of about 6 million square meters.

SCPG is the third largest commercial management group in China, with its commercial real estate projects of more than 60 and a GFA of nearly 6 million square meters. The projects are mainly distributed in the Yangtze River Delta, Pearl River Delta and the Bohai Economic Rim, forming five major and mature commercial product lines including SCPG INCITY, SCPG INREACH, SCPG CENTER, SCPG INPLACE and SCP PLAZA.

According to the analysis of the industry insiders, Vanke has the advantages of a large number of project resources and capitals, while SCPG, with more than 14 years of development in the commercial real estate field, has mature business development and management ability. The orderly integration will produce significant synergy effects, helping the two companies to become leading commercial real estate giants in China.

It is noteworthy that, according to Vanke, the company intends to unite other partners to set up two professional commercial real estate investment funds for the acquisition of 42 commercial real estate projects owned by the company, which are then commissioned by the investment funds to SCPG or its subsidiaries for operations management.

According to the announcement, Vanke is expected to invest a total of RMB 5.09 billion Yuan in the two investment funds, with the corresponding investment ratio of 39.4%. Vanke intends to use the investment funds to purchase some or all of the rights and interests of the 42 commercial real estate projects. If all the transactions above are concluded, the total transaction price is expected to be between RMB 8.6 billion and RMB9 billion Yuan.

The commercial real estate projects acquired with the investment funds will be commissioned to the SCPG or its subsidiaries for operations management. Furthermore, Vanke will sign commission management work agreements with SCPG or its subsidiaries. For other commercial real estate projects in the future, Vanke will, in the same market conditions, give preference to select and commission SCPG or its subsidiaries for operations management.

As for Vanke, through the partial transfer of assets or equity, the company will hold the commercial properties in investment funds. This will undoubtedly contribute to the realization of asset securitization of commercial real estate and enhance the company's capital utilization efficiency.

In fact, the model of using investment fund to manage commercial property is not initiated by Vanke, instead, it is a common practice in the field of commercial real estate. Many excellent domestic commercial real estate companies have realized the asset securitization of commercial property in this way.

A fund expert in Shenzhen believes that in the future, with the innovation of domestic finance and maturity of REITs policy, Vanke Business would be listed as REITs.

The integration with SCPG, as well as the layout of asset securitization, will probably accelerate Vanke’s corner overtaking in the field of commercial real estate. Vanke said that in the future, the company is committed to becoming the leading commercial real estate platform in China, continuing to improve operation and management ability, business returns and customer satisfaction.

 

(Source: 21st Century Business Herald, with the slightly adjusted)