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Dalian Wanda steps up restructuring after 2017 revenue declines 10.8% YOY

China's Dalian Wanda Group Co. Ltd. saw its revenue levels decline for the second straight year as it accelerates property asset sales amid liquidity challenges it is facing after Beijing tightened its controls on outbound investment.

With the asset sales, the property-to-entertainment conglomerate owned by billionaire Wang Jianlin is now targeting the transformation of its core commercial property development business into commercial property management, the company said in a statement Jan. 20.

According to the statement, the group's full-year 2017 operating revenue declined 10.8% year over year to 227.37 billion yuan, while unaudited net profit remained "basically flat" compared to 2016. Wanda did not release its profit figures.

The revenue decline was due to the company's disposal of 77 hotels and 13 tourism property projects in July 2017 to Sunac China Holdings Ltd., with Guangzhou R&F Properties Co. Ltd. as a trading party, the statement said.

Total assets fell 11.5% year over year to 700 billion yuan, with domestic assets accounting for 93%.

Revenue from its property arm Wanda Commercial Properties (Hong Kong) Co. Ltd tumbled 21% from the previous year to 112.54 billion yuan.

Wanda has been facing political and financial pressure since the beginning of 2017 as the Chinese government heightened its scrutiny of aggressive debt-fueled overseas asset purchases by Chinese conglomerates. Banks were required to cease providing funding for Wanda's overseas deals, and rating agencies downgraded its property unit's ratings.

"2017 was the most memorable year for Wanda, bringing a number of challenges and some hardships," Wang said in a statement.

Wang, Wanda's chairman, also announced his plan to divide Wanda Commercial Properties into two companies — a commercial property management unit and a property development arm — with the former set to be Wanda Group's "core business" in the future.

The commercial property management unit will hold and operate Wanda's commercial portfolio but also execute its "asset-light" strategy. Going asset-light means the company will seek investors to jointly develop shopping malls, with Wanda being responsible for design, construction and leasing, and in some cases, be exempt from paying land costs.

Its property development unit will continue to develop commercial and residential properties in a traditional way, but it will not seek debt-fueled scale expansion anymore, Wang said.

In the meantime, Wanda is looking to off-load a series of overseas assets it accumulated over an acquisitive spree that started in 2012, in order to pare down debt and conform to government policies.

The company is said to be in talks to sell two property projects in Australia to Chinese developer Yuhu Group, on the back of its agreement to transfer its One Nine Elms mixed-use development in London to Guangzhou R&F earlier in January.

In the same statement, Wang said the group would find "any method" to lower its debt levels and gradually clear its overseas loans.

"We will not permit any credit default globally," he said.

As of Jan. 19, US$1 was equivalent to 6.40 yuan.