On January 8, 2021, SOHO China held its fourth season 2020 online leasing recognition meeting, and Pan Shiyi, as the founder, attended.
Across the electronic screen, Lao Pan made a self-reflection to the crowd. He said that 10 years ago when someone scolded him, he would always scold back, and 5 years ago when someone scolded him, he could hold back from scolding back. And now, after the 2020 Epidemic, he realized his own insignificance and learned to be humble, “Now there are still people scolding me online, I’m not angry anymore, much less scolding each other, I’m just an ordinary person who builds houses and rents houses, do my part, don’t be right or wrong.”
This is the latest public event Pan Shiyi attended with his trademark smile, and his words “not angry” also seem to be true. After all, over the years, netizens have accused him of many things, including not donating to Wuhan during the epidemic, or donating a cumulative $600 million to U.S. colleges and universities, and questioning why he and his wife frequently sell their domestic assets.
After investigation, AI Finance found that from 2014 to now, Pan Shiyi has sold domestic assets to cash out nearly 30 billion yuan, while also buying and selling overseas. But can old Pan really liquidate his domestic assets?
Selling domestic assets even at a discount
The keynote of SOHO China in recent years has been “sell sell sell”.
At first, Pan Shiyi sold off SOHO China’s marginal assets, and in 2014, after only three months, SOHO China found buyers for two projects in Shanghai, SOHO Jing’an Plaza and SOHO Hyland Plaza, which were sold to Financial Street Holdings for $5.232 billion in non-core locations in Shanghai.
At the Time, Pan Shiyi said that it was still SOHO China’s long-term development strategy to hold and operate office properties in prime locations in Beijing and Shanghai, and would not change. The implication was that it was not surprising to sell a marginal business.
However, in the seven years since then, SOHO China has staged a succession of asset sales.
In September 2014, Pan Shiyi sold 100,000 square meters of property in Shanghai Lingkong SOHO to Ctrip for $3.05 billion, when he had acquired the land use rights for only 1.562 billion yuan, and hired world-renowned architect Zaha Hadid to create a futuristic feel for what was once a landmark and a Netflix hit spot in the area.
Photo/Visual China
Immediately afterwards, in 2015, the Shanghai Bund IFC (8-1) site, which had once been openly contested by Pan Shiyi and Guo Guangchang, the head of Fosun Group, was transferred by Pan Shiyi to his former rival Guo Guangchang for a consideration of RMB 8.493 billion. I wonder if Pan Shiyi, who was on vacation in Prague in 2011 and didn’t forget to grab the land, expected that he would re-sell the land to Fosun four years later, not only without losing money, but also with more than 5 billion yuan in return.
In 2016, Pan Shiyi sold Shanghai SOHO Century Plaza to Guohua Life Insurance for a total of 3.22 billion yuan, and in 2017, Hongkou SOHO and Lingkong SOHO were sold to Singaporean company Keppel Land and Hong Kong‘s leading private equity firm Keyway Capital for 3.57 billion and 4.944 billion respectively.
According to incomplete statistics from AI Finance, since 2014, Pan Shiyi has been cashing out more than 30 billion yuan by selling assets one after another.
If at first Pan Shiyi sold only non-core assets, then two years ago, when Pan Shiyi moved his once proudest assets, the “Big Eight”, everything seemed to have changed.
The so-called “eight majors” are SOHO China’s eight core office projects – Wangjing SOHO, Guanghua Road SOHO Phase 2, Qianmen Street, and Lize SOHO in Beijing, as well as Bund SOHO, SOHO Renaissance Plaza, Gubei SOHO, and SOHO Shanghai. Plaza, Gubei SOHO and SOHO Tianshan Plaza projects in Shanghai.
What does this mean? It means that once the sale is successful, Pan Shiyi will have liquidated all of SOHO China’s assets in China.
Initially, Pan Shiyi even envisioned selling the “Big 8” as a bundle, and his contact with New York-based investment management firm BlackRock, which wanted to adopt a privatization model for the acquisition, opened up the possibility of this somewhat daring idea.
“SOHO (China) has a relatively limited investment value with the self-owned projects on hand. And it’s not so easy to find a suitable ‘receiver’ for such a large plate.” A source close to SOHO China told AI Business News.
And the privatization plan proposed by BlackRock can greatly reduce the acquisition cost, although it will make Pan Shiyi a lot less money, but at least, the deal can be completed.
Just the accident came.
“After the outbreak of the epidemic in 2020, Blackstone withdrew completely, after SOHO China and high tide capital rumors ‘gossip’, but high tide ruthlessly disavowed the rumors, and now there is no more information on the market. An industry insider who has been in the commercial real estate business for more than 10 years told AI Financial News that he even felt that Pan Shiyi’s “eight villains” were difficult to sell.
A building office, complete the whole process of transfer, the so-called bulk investment transactions, is a very long process, “especially equity transactions, need to finalize a lot of details, short 6-8 months, long a year, and even more than a year time are there.” The aforementioned people said, Pan Shiyi this deal to get off, can be very uncomplicated.
From the earliest media exposure after SOHO China intends to sell its office building interests for $8 billion, to the BlackRock Group offer of $4 billion to do privatization negotiations, Pan Shiyi’s assets in hand is almost half the price reduction. As one of the most calculating bosses in the Chinese business world, Pan is obviously not happy about this, as he always says he is “a pure businessman”, but this “purity” is hardly enough to bring him greater profits today.
This has naturally led to questions from netizens. While Pan Shiyi keeps saying that he will hold his high-quality assets for a long time, he starts to look for buyers to sell them, even at a discount.
In the media exchange session after the recognition meeting in early January this year, Pan Shiyi did not respond positively to AI Finance’s questions about the progress of privatization, only saying that the company was busy issuing announcements to dispel rumors last year, and many announcements were made in the middle of the night, “As a listed company or look at the announcement, this is the most accurate news.”
To sell or not to sell, he did not give an accurate answer.
“Embrace” overseas
One side is selling at Home, the other side is buying overseas.
Photo/Visual China
The company’s vision is really different when it comes to spending money, and after 2014, he no longer chose to purchase any new domestic projects. Even before clearing out his domestic assets, Pan Shiyi had already started buying abroad.
Unlike Li Ka-shing, who sold his assets in mainland China and bought out half of his land in the United Kingdom, Pan chose to buy a large amount of assets in the U.S. In 2011, he bought the Port Authority Coach Station office building next to Manhattan Plaza in New York for $700 million, and in 2012, he paid $600 million for a 49% stake in Manhattan’s Park Avenue Plaza.
In 2013, Pan Shiyi’s current wife, Zhang Xin, CEO of SOHO China, joined forces with the Safra Family of Brazil to acquire a 40% stake in the General Motors Building in the United States for $1.4 billion. In addition, Pan Shiyi’s eldest son also set up a real estate company in the UK, taking over several local property projects.
After the string of overseas acquisitions, some media raised questions. Lao Pan responded, “The money invested overseas comes from the family trust and has nothing to do with SOHO China’s corporate actions.” But looking at the shareholding structure, Pan Shiyi and his wife Zhang Xin hold 63.93% of SOHO China’s equity, and his wife Zhang Xin is a US national. And since 2015, all of the SOHO China stakes held by Pan Shiyi have been transferred to Zhang Xin’s name.
At the end of 2019, during the period when SOHO China intends to sell its “eight villains”, Pan Shiyi again quietly began a series of overseas capital moves. According to SkyEye, from December 18, 2019 to January 14, 2020, Pan Shiyi has registered seven companies in just 28 days, all with overseas shareholders. Among the seven newly registered companies, except for Tianjin Runshi, whose business scope involves overseas investment and science and technology development, the business scope of the remaining six companies is basically the same, all of which are engaged in enterprise management, economic and trade consulting, public parking services for motor vehicles and rental of office premises.
SOHO China has not publicly responded to the real intention of registering 7 companies intensively. But at this critical point in the asset sale, it is inevitable that industry insiders will speculate on its true intentions. Zhang Gang, director of Southwest Securities, told AI Financial that the process of asset restructuring will inevitably involve profit distribution, and one important consideration for registering an offshore company is to avoid taxes in a reasonable and legal way. For example, the British Virgin Islands, where SOHO China (BVI-1) Limited is registered, is a tax haven, and the tax in the British Virgin Islands is almost negligible compared to the 20% income tax in China.
As the real estate veteran began to travel to and from many places at home and abroad for his investment business, the image of public welfare that he once portrayed has changed.
Unlike the low-key image of other real estate tycoons, Pan Shiyi is a keen “microblogger” and has successfully established himself as one of the top microbloggers, with over 20 million followers, even though he is not from the entertainment industry.
Over the years, Pan Shiyi has also been doing a lot of work, sometimes selling apples for his family in rural Tianshui, Gansu Province, sometimes posting his photography, and sometimes teaching people programming, sparing no effort to create a persona of a big brother. However, this has also attracted the attention of thoughtful netizens, and thus found some clues. For example, at the height of last year’s epidemic in China, Pan Shiyi’s company and family fund did not donate a single cent, and simply posted a Weibo message in solidarity with the Wuhan epidemic, which ended up being denounced by netizens.
In fact, Pan Shiyi’s biggest investment in public welfare was putting money into cooperation with Harvard, Yale and other prestigious overseas schools, donating $100 million to set up scholarships. 2014 saw the couple donate $15 million to Harvard University, and later set up a foundation to donate $100 million to Harvard again, and the same year they also donated $15 million to Yale University.
At the time of the donation, Zhang Xin explained it this way, “to allow poor Chinese students to go to world-class universities for their undergraduate studies.” But it was soon discovered that not long after the donation, Pan Shiyi’s two sons were enrolled at Yale and Harvard. Cao Dewang once commented meaningfully on this charity: “What exists is justified, and Pan Shiyi and his wife, they are both spooky and smart.”
The Waterloo of Assets
Looking back, it’s not as if SOHO China didn’t have a chance to become great.
In 2007, the Hong Kong-listed company set a record for the largest commercial real estate IPO in Asia. A spirited Pan Shiyi and his wife shouted the slogan “Over $100 billion in five years, beyond Vanke”. Three years later, in 2010, SOHO China recorded an annual revenue of 18.423 billion yuan, surpassing Evergrande and nearly three times that of Sunac.
Photo/Visual China
Many insiders attribute SOHO China’s success during this period to Pan Shiyi’s eye for land investment. He has always been known for acquiring land at low prices and later building high-value office projects. For example, according to media reports, in 2005, when the average price of commercial residential properties in Beijing was still at RMB 6,725/㎡, Pan Shiyi sold Shangdu SOHO to a Shanxi-based owner at a unit price of 20,000/㎡ and a total price of 700 million RMB, which was three times higher than the market price.
Before 2013, SOHO China had created landmark buildings such as Beijing SOHO Modern City, Sanlitun SOHO and Zhongguancun SOHO. Those office buildings, shaped like honeycomb coal, were packaged by Zhang Xin with Wall Street aesthetics and high level design, and eventually became famous in the capital for their high selling prices. At its peak, it accounted for nearly half of the sales of real estate projects in Beijing’s CBD.
At the same time, Pan Shiyi gradually became a popular icon, and in 2012 he was even ranked number one on China’s microblogging opinion leader list, with fame and pressure over such celebrities as Jack Ma, Li Kaifu, Lang Xianping and Fang Zhouzi. Some media reports said that at that time, customers who spent more than 50 million yuan could have a meal with him, like a “Chinese version of Warren Buffett’s lunch”. And because of the popularity, the threshold of the meal ticket soon rose to 100 million yuan.
However, years later, it turned out that Pan’s efforts were not in the right position. Five years later, SOHO China not only failed to meet its performance targets, but instead had to undergo business transformation.
In 2013, the commercial real estate market turned cold, and Pan Shiyi began to change the company’s business model from “development-sales” to “development-holding”. This new model allowed SOHO China to turn its commercial properties in many locations into self-owned leases, and Pan Shiyi became a “charterer”, and he also decided to sell those businesses that had nothing to do with leasing.
It’s not just the company that is transforming. Since 2013, Pan Shiyi has also been going further and further down the road of “not doing his job”. He not only sells apples, publishes books, and does photography, but also works as a carpenter, learns programming, and even continuously monitors PM2.5, which some netizens affectionately call “Pan Pan”.
But no matter how successful Pan’s public image has been, it is an indisputable fact that SOHO China has lost the possibility of becoming a first-tier real estate brand since it has been “liquidating” its mainland commercial assets one after another.
Behind the resale of commercial assets is the rental return dilemma SOHO China is facing. Pan Shiyi once said publicly, “I’m embarrassed to say that the rental return in China is less than 3% in a city like Beijing, but the cost of capital for bank loans is more than 4%, which is almost the lowest cost of capital in the real estate industry, but in this case, it means that the annual property operation will still lose 2%. “
So, for Pan Shiyi, it was the lucrative dividends from the sale of properties that allowed the couple’s personal wealth to climb higher. in 2019, the couple’s personal wealth reached 21.57 billion yuan on the Forbes billionaires list, ranking 597th. This amount of wealth is not considered to be at the top of the rich list, but the cash they hold in their hands can be very significant.
According to media statistics, since 2006, SOHO China has implemented dividends 12 times, with a cumulative net profit of 44.258 billion yuan and cumulative cash dividends of 20.778 billion yuan, a dividend rate of 46.95%. Based on the shareholding ratio of Mr. and Mrs. Pan Zhang, the couple has received a cumulative cash dividend of about 13.3 billion yuan.
It’s hard not to have a public debate when you put a lot of cash into your own pocket. The netizens simply put the label of “exquisite egotism” on it.
Many years ago, Pan Shiyi, who came out of Pingliang, Gansu Province, also talked about his dream. He said his dream was to return home to the northwest, live in a kiln, herd sheep, and have a green river in front of him, and no one would scold me online.
People are clear in their hearts that Lao Pan’s words about returning to his hometown are in the end a joke. What he really desires in his heart should not be these.
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