Dalian Wanda Commercial Properties has received $2 billion worth of support from 11 cornerstone investors ahead of its Hong Kong initial public offering.
The second largest developer of shopping malls and office buildings in the world aims to raise up to $3.86 billion in a listing, which would make it Hong Kong's largest IPO this year assuming it gets away this month.
Books open on Monday for the unit of billionaire Wang Jianlin's Dalian Wanda Group, with pricing scheduled for December 15.
On offer are 600 million primary shares between HK$41.80 and HK$49.60 per unit, putting the company's valuation between HK$161 billion and HK$191.5 billion (US$20.8 billion and US$24.7 billion).
CICC and HSBC are leading the deal as joint sponsors, while Goldman Sachs, UBS and BOCI are acting as joint global coordinators. Barclays, Bank of America Merrill Lynch, Deutsche Bank, Credit Suisse, Citi, Nomura and DBS are among the joint bookrunners and lead managers.
Kuwait Investment Authority (KIA) and Och-Ziff Capital Management will pledge a combined $550 million in the company, according to a source close to the deal.
Other cornerstones include China Life Insurance, Ping An Insurance and Dutch pension fund APG. Dalian Wanda's IPO comes after CGN Power raised HK$24.52 billion (US$3.16 billion) in a flotation, surpassing HK Electric's HK$24.1 billion listing in January.
The developer initially sought to raise between $5 billion and $6 billion but investors weren't keen on the high valuation. Indeed, Dalian Wanda is attempting to come to market at one of the most challenging times for China’s real estate markets.
Despite the government’s efforts to stimulate China’s property market, it continues to struggle. Slowing sales, construction dropping off and banks becoming more cautious about lending have all contributed to a paltry year for the China’s real estate sector.
In addition, Beijing introduced restrictions on second and third home purchases, higher down payments on mortgages and tightened credit for property developers.
The real estate market accounts for 16% of the country's GDP, meaning that any downturn in China’s property market would have an adverse effect not just on the housing sector but on the entire economy.
Dalian Wanda's net sales totalled Rmb23.3 billion ($3.8 billion) for the first half of the year, a 27% drop from Rmb31.8 billion in the same prior-year-period.
Still, despite declining sales and negative sentiment towards real estate generally, analysts argue that government initiatives could help larger developers next year.
In the spring, the government began taking action to prevent a crash by urging banks to offer more mortgage financing to first time home-buyers. It also started allowing equity issuance to developers.
The relaxed policies by local governments will benefit the larger players the most, such as Dalian Wanda, which has good access to onshore and offshore funding.