From Billionaire to Possible Bankruptcy: Ban Sutong’s Battle to Save His Real Estate Empire

From Billionaire to Possible Bankruptcy: Ban Sutong’s Battle to Save His Real Estate Empire

Pan Sutong bet billions on a mega-project to build luxury homes in Tianjin for China’s nouveau riche – but that gamble has backfired and now Pan’s creditors want his assets to be confiscated.

sThe Sutong Empire at its peak had few rivals. The 59-year-old real estate mogul has amassed a fortune of $12.2 billion including a lavish mansion in Hong Kong next to the city’s richest person, Li Ka-shing. He owned vineyards in California and France, as well as equine breeding and training land in Australia spanning over 1,200 acres.

Although he never completed high school, Ban was able to build his Goldin Group into a sprawling conglomerate that includes consumer electronics, winemaking, financial services, and most of all, real estate. His master plan was to build the Golden Metropolitan, a small, sprawling city in Tianjin, a port of about 14 million people 85 miles southeast of Beijing. His project will include 12 towers, 33 palaces, and the tallest skyscraper in China, rising 117 floors in the air.

But Ban’s plans are now disintegrating under a mountain of debt. Work on his favorite project has largely been halted and creditors are seeking to liquidate his company in both Hong Kong and Bermuda. Even his mansion in Hong Kong had to be remodeled several times to raise much-needed funds. The brilliant businessman, who climbed to number six in Hong Kong’s wealth rankings just five years ago, is now facing an uphill battle just to stay afloat.

In July, the Hong Kong High Court ordered Ban to declare bankruptcy and cancel one of his holding companies over unpaid obligations of HK$8 billion ($1 billion) owed to CITIC Bank. The matter is being appealed, because the billionaire and his holding company have the ability to pay off the debts in full, according to a representative of Pan. But Ban’s problems do not end there. The Bank of China filed a separate bankruptcy petition against it in Hong Kong for another 740 million yuan ($109 million) of unpaid debts.

This case, which was heard on August 2, is currently pending pending the outcome of Ban’s appeal against the previous ruling. Meanwhile, China bad debt manager Cinda Asset Management added to Ban’s further legal troubles by suing him as well as several related companies for another 7.4 billion yuan ($1.1 billion) in unpaid loans and accrued interest linked to the Tianjin project. .

A unit of Deutsche Bank has petitioned in Bermuda to file for liquidation of Goldin Financial Holdings, the Hong Kong-listed company that owns Pan’s wine, finance and real estate development companies.

“He has to find a way to pay those debts, or he has to come to a new agreement with the lenders,” says Kenny Ng, stock strategist at Everbright Securities. โ€œOtherwise, he will have no choice but to go bankrupt.โ€

โ€œHe has to find a way to pay those debts, or he has to come to a new agreement with the lenders. Otherwise, he will have no choice but to go bankrupt.โ€

Kenny Ng from Everbright Securities

sa, who spent his teenage years in the US but moved to Hong Kong at the age of 21, initially ventured into consumer electronics. He founded the Matsunichi brand in the Asian financial center in 1993 to produce MP3 players as well as karaoke TV screens. In 2002, he took over management of Hong Kong-listed Emperor Technology Venture and renamed it to Matsunichi Communication Holdings. Then the booming real estate market in China in the 2000s caught his attention, and he decided to pivot.

Matsunichi’s name was changed to 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 the sister companies surged, including a 40% increase in one day, giving Pan a net worth of $12.2 billion in 2016. However, the Hong Kong Financial Supervisory Authority issued a warning about Goldin Properties’ high concentration in Stocks after wild price swings.

Citic’s $1 billion loan, personally secured by Pan, was intended to fund the $1.5 billion privatization of Goldin’s real estate arm in 2017. Such a move is usually taken when controlling shareholders believe the public market is underestimating their company, as Everbright’s Ng says:

Goldin Properties primarily focused on high-end properties. It is the unit responsible for the construction of the mega project in Tianjin. The development began in 2007 because Pan was confident in Tianjin’s prospects to develop into a regional economic hub, according to Goldin’s website.

But since then, Tianjin’s economic importance has faded, and Pan’s investment company Silver Starlight Holdings has not repaid the loan that was first due in 2019. It has also not made any other payments except for a portion of the late interest in 2020, court documents show .

Construction of the skyscraper largely came to a halt in 2015 after receiving what Goldin claimed was a $5.9 billion investment, still well short of the roughly $10 billion needed to complete the project. Today, the tallest tower has become known on Chinese social media as the largest in the country Lan Wei Lu or Abandoned building.

Yan Yujen, director of research at the Shanghai-based China Research Institute E-house, says Ban would seek to avoid selling assets and plots of land in Tianjin to pay off creditors because doing so would amount to admitting failure. It would also mean the dissolution of his real estate company.

“The Tianjin project is huge, and it’s hard to give in to Ban,” Yan says. โ€œBut if all else fails, he should sell it for money to solve his debt problems.โ€

Price, however, is another issue. Chinese President Xi Jinping is lowering housing prices and reducing leverage, which has dealt a heavy blow to the country’s real estate market. Developers are now hesitant to acquire the land, especially since many of them have had their own cash flow problems and recently defaulted on their debts.

For Ban, the prospect of losing control of the Tianjin Project would reverse the fate that befell another origin in the Grail. The 28-storey Goldin Financial Global Center in Kowloon Bay was taken over by creditors in 2020 after the company failed to meet debts totaling more than $1.3 billion against the building.

Now, Goldin Financial Global Center wants a new buyer after a previous deal to sell it for $1.8 billion was terminated in May for unspecified reasons.

The building served as the headquarters for Goldin Financial, which has lost more than 90% of its value over the past five years. The company reported a nearly 40% decline 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 of current liabilities due within 12 months, as opposed to just $2.1 million of cash and cash equivalents.

Ban resigned in June as Chairman and CEO, handing the reins to former Vice Chairman Abraham Shek Lai Hem.

Meanwhile, Ban repeatedly mortgaged his mansion in Hong Kong’s exclusive Deep Water Bay for at least $85.6 million. In fact, just a few years after Ban bought the drug 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 the two parties were about to take the matter to court before they could resolve their differences.

Pan also owns a housing project in Hong Kong’s Ho Man Tin district, which presale was banned last year in an unprecedented move by authorities due to concerns about the company’s financing. The aforementioned Pan representative said that the Grand Homm project had already received its certification of compliance from the Hong Kong authorities at the end of August, and aims to deliver all of its homes within 30 days. However, the schedule has been repeatedly pushed back since Ban first acquired this plot of land in 2016.

In recent years, Ban has had to stay away from several other projects in Hong Kong. He gave up his right to develop a separate housing project in Ho Man Tin in 2020, and lost a $3.2 million deposit in 2019 to give up his participation in a $1.4 billion bid for a plot of land on the site of the former Kai Tak Airport. Goldin Financial spent nearly $1.2 billion to acquire a separate plot of land in Kai Tak in 2018 that was sold in 2020 in a deeply discounted $446.5 million cash deal, which also included a profit-sharing agreement giving Goldin 30% of any income My future. Development of the site, after finalizing a previous sale of $898 million.

“Judging from the debt and venture disputes for Pan in Hong Kong, it is facing a severe cash shortage,” says E-house’s Yan. “He’s on the verge of bankruptcy, and that depends on whether he can sell more assets in Hong Kong to prevent that from happening.”

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