Pan Sutong’s battle to save his real estate empire
Pan Sutong bet billions on a massive project to build opulent homes in Tianjin for China’s new rich, but the bet backfired and now Pan’s creditors want to seize his assets.
PA Sutong’s empire at its height had few rivals. The 59-year-old property mogul once amassed a $12.2 billion fortune that included a lavish mansion in Hong Kong virtually next door to the city’s richest person, Li Ka-shing. He owned vineyards in California and France, as well as a horse breeding and training ground in Australia spanning over 1,200 acres.
Although he never finished high school, Pan managed to grow his Goldin Group into a sprawling conglomerate spanning consumer electronics, winemaking, financial services and, most importantly, real estate. Its master plan was to build Goldin Metropolitan, a sprawling mini-city in Tianjin, a port of about 14 million people about 85 miles southeast of Beijing. His project would include 12 towers, 33 mansions and the tallest skyscraper in China, rising 117 stories in the air.
But Pan’s plans are now crumbling under a mountain of debt. Work on his favorite project is largely halted and creditors are calling for the liquidation of his companies in Hong Kong and Bermuda. Even his mansion in Hong Kong had to be re-mortgaged several times to raise much-needed funds. The once flamboyant entrepreneur, who rose to sixth in Hong Kong’s wealth rankings just five years ago, now faces an uphill battle just to stay afloat.
In July, the Hong Kong High Court ordered Pan to declare bankruptcy and liquidate one of its holding companies for unpaid debts of HK$8 billion ($1 billion) owed to Citic Bank. The order is being appealed because the tycoon and his holding company have the ability to repay the debt in full, according to a Pan representative. But Pan’s problems don’t end there. The Bank of China has filed a separate bankruptcy petition against him in Hong Kong for an additional 740 million yuan ($109 million) of unpaid debts he failed to pay.
That case, which was heard on August 2, is currently on hold pending the outcome of Pan’s appeal against the earlier decision. Meanwhile, Chinese bad debt manager Cinda Asset Management has compounded Pan’s legal troubles by suing it and several of its associated companies for another 7.4 billion yuan ($1.1 billion) in loans. unpaid debts and accrued interest related to the Tianjin project. .
A unit of Deutsche Bank has filed a petition in Bermuda seeking the liquidation of Goldin Financial Holdings, the Hong Kong-listed company that owns Pan’s real estate, financial and real estate development business.
“He needs to find a way to pay off those debts or make a new deal with the lenders,” says Kenny Ng, securities strategist at Everbright Securities. “Otherwise, he has no choice but to go bankrupt.”
“He needs to find a way to pay off those debts or make a new deal with the lenders. Otherwise, he has no choice but to go bankrupt.
Pan, who spent his teenage years in the United States but moved to Hong Kong when he was 21, first ventured into consumer electronics. He founded the Matsunichi brand in the Asian financial hub in 1993 to produce MP3 players as well as karaoke TV monitors. In 2002, he took over Hong Kong-listed Emperor Technology Venture and renamed it Matsunichi Communication Holdings. Then a booming property market in China in the 2000s caught his eye, and he decided to pivot.
Matsunichi was renamed Goldin Properties in 2008, the same year Pan acquired another Hong Kong-listed company called Fortuna International, which was later renamed Goldin Financial. Years later, shares of sister companies soared, including a 40% rise in a single day, giving Pan a net worth of $12.2 billion in 2016. Hong’s financial watchdog Kong, however, issued a warning about the high concentration of ownership in Goldin Properties after wild price swings.
Citic’s $1 billion loan, personally guaranteed by Pan, was intended to fund its $1.5 billion privatization of Goldin’s real estate arm in 2017. Such a move is usually made when controlling shareholders believe the public market undervalues their business, says Everbright’s Ng.
Goldin Properties had primarily focused on high-end real estate. It is the unit responsible for the construction of the mega-project in Tianjin. Development began in 2007 because Pan was confident in Tianjin’s prospects of becoming a regional economic center, according to Goldin’s website.
Since then, however, Tianjin’s economic importance has only faded, and Pan’s investment holding company, Silver Starlight, has failed to repay a loan that fell due in 2019. It also failed to made no further payments except for a portion of overdue interest in 2020, court documents show.
Construction on the skyscraper had largely halted in 2015 after receiving what Goldin claimed was a $5.9 billion investment, which is still far short of the roughly $10 billion needed to complete the building. project. Today, the high-rise tower is known on Chinese social media as the tallest in the country lan wei lou, Where abandoned building.
Yan Yuejin, research director at the Shanghai-based E-house China Research Institute, said Pan would seek to avoid selling the assets and land in Tianjin to repay creditors because it would be an acknowledgment of failure. It would also mean the dissolution of his real estate company.
“The Tianjin project is grand and it’s hard for Pan to give up,” Yan said. “But if all else fails, he has to sell it for cash to solve his debt problems.”
The price, however, is another issue. Chinese President Xi Jinping has been pushing to lower property prices and reduce financial debt, which has dealt a severe blow to the country’s property market. Developers are now reluctant to acquire land, especially as many have run into their own cash flow problems and have recently defaulted on their debts.
For Pan, the prospect of losing control of the Tianjin project would reflect a fate that has already struck another trophy. The 28-story Goldin Financial Global Center in Kowloon Bay was seized by creditors in 2020 after the company failed to honor debts totaling more than $1.3 billion secured by the building.
Now Goldin Financial Global Center is looking for a new buyer after a previous deal to sell it for $1.8 billion was terminated in May for unspecified reasons.
The building had served as the headquarters of Goldin Financial, which has lost more than 90% of its value over the past five years. The company reported a nearly 40% drop in revenue to $47.2 million for the 12 months ending June 2021, according to the latest available financial report. It also said it had $956 million in current liabilities due within 12 months, compared to cash and cash equivalents of just $2.1 million.
Pan stepped down in June as the company’s chairman and chief executive and handed over the reins to former vice chairman Abraham Shek Lai Him.
Meanwhile, Pan has repeatedly mortgaged his mansion in Hong Kong’s exclusive Deep Water Bay neighborhood for at least $85.6 million. In fact, just a few years after Pan bought the property for $319 million in 2017, he was turning to his famous neighbor for help. Li Ka-shing’s CK Asset Holdings agreed to bail out Pan with a loan in 2020, but the deal ran into problems and both sides were close to taking the matter to court before they could resolve their differences .
Pan also has an apartment project in the Ho Man Tin district of Hong Kong, the presales of which were banned last year in an unprecedented move by authorities due to concerns over funding for the venture. The aforementioned Pan representative said that the Grand Homm project had already received its certificate of compliance from the Hong Kong authorities at the end of August and that it aims to deliver all its houses within 30 days. The schedule, however, has been pushed back several times since Pan first acquired this plot of land in 2016.
In recent years, Pan has had to step away from several other projects in Hong Kong. He gave up his right to develop a separate residential project in Ho Man Tin in 2020 and lost a $3.2 million deposit in 2019 to give up his stake in a $1.4 billion bid for a plot of land on the former site of Kai Tak Airport. Goldin Financial had spent nearly $1.2 billion to acquire separate land in Kai Tak in 2018 which was sold in 2020 in a heavily discounted $446.5 million cash deal, which also included a profit-sharing deal giving Goldin 30% of any future revenue from the site’s development, after a previous $898 million sale ended.
“Judging from the debt disputes and Pan’s plans in Hong Kong, it faces severe cash shortages,” E-house’s Yan said. “He is on the verge of bankruptcy, and it depends on whether he can sell more assets in Hong Kong to prevent that from happening.”