After the failed 4.2 billion yuan private placement, Yuyuan had to frequently sell assets.

After the market closed on July 1, Shanghai Yuyuan Tourism Mall (Group) Co., Ltd. (hereinafter referred to as "Yuyuan") announced that its wholly-owned subsidiary Shanghai Xingyao Real Estate Development Co., Ltd. intends to sell the ownership/usage rights of Building 1 and some parking spaces in the second phase of Xingguangyao Plaza. The buyer is Shanghai Huirong Dongfang Technology Development Co., Ltd. (hereinafter referred to as "Huirong Dongfang"), with a total transaction amount of 1.515 billion yuan.

According to Qichacha information, Huirong Dongfang has only one shareholder - Henan Investment Group Co., Ltd., a state-owned enterprise in Henan Province, with the Henan Provincial Department of Finance as the actual controller behind it.

Guo Guangchang has always had close ties with state-owned assets from various regions.

The major asset restructuring of Yuyuan Mall, the predecessor of Yuyuan, included transactions between Fosun Group and the State-owned Assets Supervision and Administration Commission of Huangpu District, Shanghai. In addition, as the controlling shareholder, Fosun also participated in the state-owned enterprise reforms of Nanjing Nangang, Hainan Mining, and Jiangsu Wanbang.

On November 30 last year, Guo Guangchang visited Henan Cultural Tourism Investment Group; on September 21, An Wei, member of the Standing Committee of the Henan Provincial Party Committee and secretary of the Zhengzhou Municipal Party Committee, also met with Guo Guangchang and his entourage.

According to the announcement, Building 1 of the second phase of Xingguangyao Plaza is located at No. 1 and No. 2, Caoyang Road 1888 Lane, Putuo District, Shanghai, with a total of 30 floors and a saleable area of 59,632.51 square meters. The average transaction price is 24,800 yuan per square meter, with a consideration of 1.479 billion yuan. Additionally, there are some underground parking spaces, with a transaction consideration of 36 million yuan.

Yuyuan stated that the sale will help the company recover funds, enhance the company's overall liquidity, and have a positive impact on the continuous improvement of the company's financial statements.

On June 28, Yuyuan just announced its intention to sell a ski resort in Hokkaido, Japan, for a price of 1.71 billion yuan, but the buyer has not yet been disclosed. Earlier in late May, Yuyuan said that it was planning to introduce strategic investors for its subsidiary Shanghai Yuyuan Jewelry Fashion Group Co., Ltd. (hereinafter referred to as "Jewelry Fashion Group"), aiming to raise no more than 2 billion yuan through capital increase and share expansion, with the proportion of external investors' equity not exceeding 20%.

As a listed platform under the Fosun Group, Yuyuan may face considerable liquidity pressure, from selling shares to selling projects. As of the first quarter of 2024, the company's short-term borrowings were 10.85 billion yuan, non-current liabilities maturing within one year were 9.759 billion yuan, and total current liabilities exceeded 60 billion yuan, while the monetary funds on the books were only 10.845 billion yuan.

In 2023, Yuyuan achieved revenue of 58.147 billion yuan, representing a year-on-year increase of 15.83%, and net profit attributable to shareholders was 2.024 billion yuan, down 45% year-on-year. Affected by the real estate business, the company's net profit after deducting non-recurring gains and losses during the period was a loss of 451 million yuan, the first such loss since listing.

• 01 

Selling assets on one hand, funding the Fosun Group on the other

To alleviate liquidity issues, Yuyuan once proposed a private placement plan in 2023.

In March 2023, Yuyuan disclosed its private placement fundraising plan for the first time, intending to issue no more than 1.17 billion shares and raise no more than 8 billion yuan. The funds raised were intended to be invested in five projects, including the jewelry fashion business segment, the company's digital operation capability construction, replenishing liquidity and repaying loans.

At that time, Guo Guangchang's Fosun Group was frequently selling assets, including selling a 60% stake in Nanjing Nangang for nearly 13.6 billion yuan and selling Fosun Group's headquarters building in Guangzhou. Fosun International's 2022 annual report also showed that it had increased its asset exit efforts since June 2022, with over 40 billion yuan in signed contracts at the group level and nearly 30 billion yuan in cash recovered.

However, Yuyuan's massive private placement plan has been delayed for a long time, and the Shanghai Stock Exchange has also issued an inquiry letter questioning its indirect investment in real estate-related businesses. After two revisions to the financing plan, in August 2023, Yuyuan reduced the fundraising amount by nearly 50% to 4.25 billion yuan.

In fact, since the A-share market opened the refinancing window in 2020, the scale of private placements has recovered somewhat in recent years. However, in 2023, both the number of private placement issuances and the amount of financing hit an annual low since the 2020 refinancing policy.

According to Shenwan Hongyuan data, as of December 29, 2023, a total of 330 private placement projects were listed on the Shanghai and Shenzhen A-share markets in 2023, a decrease of 22 projects, or a decline of 6.25%. The total amount of funds raised reached 578.147 billion yuan, a decrease of 19.99% year-on-year. Especially since the regulatory authorities expressed their intention to tighten the pace of refinancing in August, the number of issuance projects has shown a significant downward trend overall.

In May this year, Yuyuan announced the termination of the 4.25 billion yuan private placement and applied to the Shanghai Stock Exchange to withdraw the relevant application documents. The private placement plan that had lasted for over a year officially fell through.

During this period, Yuyuan was also selling assets to recover funds.

In May 2023, Yuyuan sold its stake in IGI Group (International Gemological Institute) for a transaction consideration of approximately 455 million US dollars, with the buyer being investment institution Blackstone Group; in July, Yuyuan intended to sell 25.363 million shares of Jinhui Liquor through an agreement, with a total transaction price of 599 million yuan. In March this year, Yuyuan intended to transfer a 48% stake in Shanghai Bailian Holdings for a base price of 431 million yuan.

However, while selling assets to "recover blood," Yuyuan is also "transfusing blood" to the real estate business of the Fosun Group.

In March this year, Yuyuan announced that it plans to provide financial assistance of up to 16.08 billion yuan to its joint ventures, which also constitutes a related party transaction. There are a total of seven joint ventures receiving financial assistance, all of which mainly involve real estate development projects located in cities such as Shanghai, Wuhan, Kunming, and Changsha. Yuyuan's equity stake in these companies ranges from 40% to 57.4%, not a complete controlling stake.

• 02 

Acquiring over 10 billion yuan worth of land, focusing on Shanghai and Sanya

As early as 2020, Yuyuan's liquidity issues had already begun to emerge.

As of the end of 2020, Yuyuan's net increase in cash and cash equivalents was -2.477 billion yuan, compared to -1.154 billion yuan in the same period of the previous year, a year-on-year decrease of 1.323 billion yuan. Additionally, the net cash flow generated by operating activities in 2020 was also negative, at -955 million yuan, compared to 3.439 billion yuan in the same period of 2019, representing a decline of 127.76%. During that year, Yuyuan added a total of 8 pieces of land, with land transaction amounts exceeding 12 billion yuan.

Subsequently, Yuyuan continued to invest in the real estate business.

In 2021, it acquired the state-owned construction land use rights for the WS3 unit xh128E03 plot in the Huangpu River South Extension section of Xuhui District for 5.1705 billion yuan. In 2022, it jointly bid with Ant Group to acquire the "golden lot" in Shanghai Huangpu District - the Fuyou Road plot historical style preservation project for 12.93 billion yuan. Among them, Yuyuan's subsidiary Fuyu Industry contributed 6.465 billion yuan.

It is reported that the Fuyou Road plot connects the Yuyuan business district to the west and the Bund to the east, transforming the 100,000 square meter Yuyuan business district into a 1 million square meter Greater Yuyuan area with various functions such as commerce, office, culture, and tourism.

According to the land transfer requirements, during the project construction period, the winning bidder's comprehensive tax contribution to Huangpu District must be no less than 12 billion yuan, and within five years after the comprehensive acceptance of the project planning resources, the comprehensive tax contribution to Huangpu District must be no less than 14.4 billion yuan. There are also stringent conditions such as the need to start construction within six months after land delivery.

In addition, the large plot area and the inclusion of a large number of Shikumen alleys and new-style alleys with a strong Shanghai style also increase the development difficulty and lengthen the return cycle, posing a significant financial challenge to the implementing entities.

In addition to its home base in Shanghai, Hainan is another market that Guo Guangchang is enthusiastic about.

While continuously selling assets, on June 19 this year, Yuyuan announced that its wholly-owned subsidiary Sanya Fuxin Investment Co., Ltd. acquired the land use rights of a plot in Sanya Haitang Bay for 1.794 billion yuan, with a plot ratio area of over 140,000 square meters.

According to the development and construction requirements of the plot, the winning bidder must invest in building a landmark leading project for the Hainan International Tourism Consumption Center in Haitang Bay, and the total industrial investment in Haitang Bay within the next five years must not be less than 10 billion yuan.

In 2018, Sanya Atlantis, a project with an investment of 10 billion yuan by Fosun in Sanya Haitang Bay, entered the market, with annual revenue exceeding 1 billion yuan, making it one of Fosun's stable cash cows. Having tasted the sweetness, Guo Guangchang has continuously increased his investment in the Hainan market.

In March this year, Fosun Tourism, a cultural tourism listed platform under the Fosun Group, stated that it plans to deploy the Super Mediterranean project in specific super resort cities, with the first project to be implemented in Hainan. The plot acquired by Yuyuan in Sanya Haitang Bay is likely to be used for the construction of Fosun's "Super Mediterranean · Xiyue" project in Hainan.

With the failed private placement financing and a heavy investment in Shanghai and Sanya, Yuyuan clearly needs more funding sources to meet the capital investment in real estate development.