Sunac

Sunac China Holdings Limited (“Sunac”) is a real estate company listed on the Hong Kong Stock Exchange under the stock code 1918.HK. Sunac listed on the Hong Kong Stock Exchange in October 2010. After the listing, its largest shareholder Sun Hongbin held 51.85%; Bain Capital obtained a 10.1% stake through a debt-to-equity conversion, ranking as the second-largest shareholder, and held that position for more than four years. According to Sunac’s prospectus, after the major downturn in China’s property market from the second half of 2008, Sunac made certain downward adjustments to the gross floor area originally planned to begin construction in 2008, and for the year ended 31 December 2008 recorded a net fair-value loss on investment properties of 25.9 million yuan, mainly due to a decline in the fair value of investment properties at the Times Olympic City project; in 2010 Sunac also partnered with primary land developers on primary land development projects as a strategic ancillary business, to increase its opportunities to acquire land with good development potential.

Sunac was Bain Capital’s first real estate investment in China. In 2009, Bain bought Sunac’s convertible bonds from Lehman’s liquidators at a discount of about 20%; the investments in Sunac by private equity funds such as CDH and New Horizon both preceded Bain’s. Bain subsequently reduced its holding in two stages: at the end of November 2012 it placed 120 million Sunac shares at HK$4.5 per share, cashing out HK$540 million; on July 2, 2014 it sold about 180 million shares at HK$4.28 per share, cashing out HK$772 million and fully liquidating its remaining 5.43% stake. According to Caixin, based on an investment cost of US$80 million, Bain’s total return on the Sunac deal was about two and a half times, with an annualised return of about 26%. Zhu Jia, managing director of Bain Capital Asia, said that Sunac’s operating results and performance had been much better than expected, but its share valuation was not good enough.

Sunac’s cooperation with Greentown began in 2012. At the start of that year, Greentown China was in difficulty because of its high gearing and low-profit operating model; Greentown first sold a 51% stake in Hubin Real Estate to Sunac Real Estate for a transfer price of 51 million yuan; in June of the same year, Sunac acquired half of the equity in nine Greentown projects for 3.372 billion yuan, and the two parties established Shanghai Sunac Greentown Holdings Co., Ltd. (“Sunac Greentown” for short). In 2013, Sunac Greentown entered the top 50 Chinese property developers with online-signed sales of 15.5 billion yuan, with its Shanghai region ranking among the top three with online-signed sales of 11.207 billion yuan.

On 22 May 2014, Sunac announced the acquisition of a 24.31% stake in Greentown China from its shareholders for HK$6.298 billion (about 5.06 billion yuan) at a subscription price of HK$12 per share; because of a dividend refund, the effective acquisition price was HK$11.46 per share, a premium of 49%. The sellers were Song Weiping (11.398%), his wife Xia Yibo (3.190%) and Shou Bainian (9.725%); after the transaction, Song Weiping and Shou Bainian still held about 10.473% and 8.086% of Greentown China respectively. According to a Caixin report in July 2014, this was the largest real estate merger in recent years, and after its completion Sun Hongbin replaced Song Weiping as Greentown’s actual controller. After the acquisition, Sunac’s high debt became a target of criticism; Deutsche Bank considered that Sunac’s premium acquisition consumed its cash on hand and that the move might be too aggressive, while Sunac executive president Wang Mengde said the group had net cash of about 16 billion yuan at the end of the previous year, the acquisition spending was within budget and overall debt was under control.

Speaking about property market controls at the company’s 2020 results meeting, Sunac chairman Sun Hongbin said: “I support the controls. Without controls this industry could not carry on; without controls, house prices and land prices would both soar to the sky.” He believed the control policies were good for the industry, the banks and the government, but not good for all companies, and would accelerate the differentiation among property developers.

After 2021, the decline in the property market lasted more than two years; many private developers ran into trouble, and most lost the ability to refinance and were generally unable to invest in land. According to CRIC data, among the top ten developers by value of newly acquired land in January–October 2023, Hangzhou Binjiang Real Estate Group was the only private company, while former big land buyers such as Country Garden Holdings and Sunac had all dropped off the list.