A $9 billion deal by billionaire Sun Hongbin’s Sunac China Holdings Ltd. adds to the trend of Chinese property developers swallowing up rivals and their land at a record pace.
Sunac’s purchase of hotels and projects, announced by Dalian Wanda Group Co. on Monday, comes amid what Citigroup Inc. predicts will be a “mega-consolidation” in the industry.
Developers spent a record 96.7 billion yuan ($14 billion) in the second quarter on acquiring competitors or their assets, according to data compiled by Bloomberg.
That included China Vanke Co.’s 55.1 billion yuan purchase of real estate assets of the bankrupt Guangdong International Trust Investment Corp. in Guangzhou. Now, Sunac’s purchase looks set to ensure that the total for developers’ acquisitions of competitors or their assets will surpass last year’s 188 billion yuan.
Tight credit, competition for land, and local governments’ measures to cool home markets in individual cities may be encouraging some smaller developers to exit the industry. Citigroup analysts say that a huge wave of consolidation is underway, with the biggest 10 developers set to boost their joint share of sales to as much as 28 percent this year from 20 percent in 2016.
Aggressive firms such as China Evergrande Group, Country Garden Holdings Co. and Sunac will help to drive that share to as much as 35 percent before 2020, say Citigroup analysts Oscar Choi and Marco Sze.
“Slimmer profits on home sales and ever-climbing land prices will keep squeezing smaller developers out of the industry,” said Shanghai-based Guangfa Securities Co. analyst Le Jiadong. “Even amid buoyant sales in lower-tier cities, some small builders are choosing to sell their entire assets -- and leading players are seizing the chance for further landbank acquisitions.”
This year’s total for developers’ acquisitions of competitors or their assets looks set to surpass last year’s 188 billion yuan.
Sunac is splashing out after Sun complained last year that prices at government land auctions had risen to “absurd” levels.
His firm’s 14 acquisitions since the start of last year, according to Bloomberg data, included a deal with technology company Legend Holdings Corp. that spanned 42 property projects across 16 cities, including Beijing, Tianjin, Chongqing and Hangzhou.
That list and the map above were compiled before the latest deal was announced.
--With assistance from Adrian Leung
To contact Bloomberg News staff for this story: Emma Dong in Shanghai at edong10@bloomberg.net.
To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Paul Panckhurst
©2017 Bloomberg L.P.
