Pan Sutong gambled billions on a massive project to build opulent homes in Tianjin for China’s nouveau riche, but the gamble backfired and now Pan’s creditors want to seize his assets.
PThe Sutong empire at its height had few rivals. The 59 year old man property tycoon he had once amassed a $12.2 billion fortune that included a palatial Hong Kong mansion practically 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 camp in Australia that spanned more than 1,200 acres.
Despite not finishing high school, Pan managed to build her Goldin Group in a sprawling conglomerate encompassing consumer electronics, winemaking, financial services and, most important of all, property. His master plan was to build the Goldin Metropolitan, a sprawling mini-city in Tianjin, a port of some 14 million people about 85 miles southeast of Beijing. His project would include 12 towers, 33 mansions and the tallest skyscraper in China, with 117 stories high.
But Pan’s plans are now falling apart under a mountain of debt. Work on his pet project has largely ground to a halt and creditors are seeking liquidation of his companies in both Hong Kong and Bermuda. Even his mansion in Hong Kong had to be re-mortgaged several times to raise much-needed money. The once flamboyant businessman, who rose as high as No.6 in Hong Kong wealth ranking just five years ago, now he faces an uphill battle just to stay afloat.
In July, the Hong Kong high court ordered Pan to file for bankruptcy and dissolve one of its holding companies over unpaid debts of 8 billion Hong Kong dollars ($1 billion) owed to Citic Bank. The order is being appealed because the tycoon and his holding company have the ability to pay the debt in full, according to a representative for Pan. But Pan’s problems don’t end there. The Bank of China filed a separate bankruptcy petition against him in Hong Kong for another 740 million yuan ($109 million) in outstanding debt that he has not paid.
That case, which was heard on August 2, is currently on hold pending the outcome of Pan’s appeal against the previous ruling. Meanwhile, China’s bad debt manager Cinda Asset Management has added to Pan’s legal troubles by suing he and several of his associated companies for another 7.4 billion yuan ($1.1 billion) in unpaid loans and accrued interest tied 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 firm that owns Pan’s real estate development, finance and wine businesses.
“You have to find a way to pay off those debts or make a new deal with the lenders,” says Kenny Ng, equity strategist at Everbright Securities. “Otherwise, you have no choice but to go bankrupt.”
“He has to find a way to pay off those debts or come to a new agreement with the lenders. Otherwise, you have no choice but to go bankrupt.”
PAn, who spent his teenage years in the US but moved to Hong Kong at age 21, initially ventured into consumer electronics. He founded the Matsunichi brand in the Asian financial hub in 1993 to produce MP3 players and TV monitors for karaoke. In 2002, he took over Hong Kong-listed Emperor Technology Venture and renamed it Matsunichi Communication Holdings. Then a booming real estate market in China in the 2000s caught his eye and he decided to turn around.
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 the sister companies soared, including soaring 40% in a single day, giving Pan a net worth of $12.2 billion in 2016. However, the watchdog Hong Kong financial issued a caveat on the high concentration of Goldin Properties shares after the sharp price changes.
Citic’s $1 billion loan, personally guaranteed by Pan, was intended to finance his $1.5 billion privatization from Goldin’s real estate arm in 2017. This type of move is often undertaken when majority shareholders believe the public market is undervaluing their company, says Everbright’s Ng.
Goldin Properties had primarily focused on high-end real estate. It is the unit responsible for building the megaproject in Tianjin. The development began in 2007 because Pan was confident in Tianjin’s prospects of becoming a regional economic center, according to Goldin website.
Since then, however, the economic importance of Tianjin just fadedand Pan’s investment holding company, Silver Starlight, has failed to repay a loan that was first due in 2019. It has also made no other payments except for a portion of the interest due in 2020, court documents show.
Construction on the skyscraper was largely halted in 2015 after receiving what Goldin claimed was an investment of $5.9 billion, which is still well short of the roughly $10 billion needed to complete the project. Today, the high-rise tower is known on Chinese social media as the tallest tower in the country. lan Wei Lou, either abandoned building.
Yan Yuejin, director of research at the Shanghai-based E-house China Research Institute, says Pan will try to avoid selling assets and land in Tianjin to pay off creditors because doing so would be tantamount to admitting failure. It would also mean breaking up his real estate company.
“The Tianjin project is great and it’s hard to give up on Pan,” says Yan. “But if all else fails, then you need to sell it for cash to solve your debt problems.”
The price, however, is another problem. Chinese President Xi Jinping has been working to control house prices and reduce financial leverage, dealing a heavy blow to the country’s real estate market. developers they are now reluctant to acquire landparticularly as many have found themselves with cash flow problems of their own and recently defaulted on their debts.
For Pan, the prospect of losing control of the Tianjin project would reflect a fate that has already befallen another trophy asset. The 28-story Goldin Financial Global Center in Kowloon Bay was seized by creditors in 2020 after the company defaulted on debts totaling more than $1.3 billion secured by the building.
Now Goldin Financial Global Center needs a new buyer after an earlier deal to sell it for $1.8 billion. was terminated in May for unspecified reasons.
The building had been the headquarters of Goldin Financial, which has lost more than 90% of its value in the last 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, against cash and cash equivalents of just $2.1 million.
Skillet give up in June as the company’s president and CEO, handing over the reins to former vice president Abraham Shek Lai Him.
meanwhile bread 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 the two sides they were about to take the matter to court before they managed to resolve their differences.
Pan also has an apartment project in Hong Kong’s Ho Man Tin district, whose pre-sales were 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 certificate of compliance from Hong Kong authorities in late August and aims to deliver all of its houses within 30 days. However, the timeline has been pushed back repeatedly since Pan first acquired this parcel of land in 2016.
In recent years, Pan has had to abandon several other projects in Hong Kong. He waived his right to develop a separate residential project in Ho Man Tin in 2020 and forfeited a $3.2 million deposit in 2019 to abandoned his participation in a $1.4 billion bid for a parcel of land on the site of the former Kai Tak airport. Goldin Financial had spent almost $1.2 billion to acquire a detached piece of land in Kai Tak in 2018 which was sold in 2020 at a deeply discounted cash of $446.5 million. agreementwhich also included a profit-sharing agreement that gave Goldin 30% of any future revenue development of the site, after a previous sale of $898 million. finished.
“Judging from debt disputes and Pan’s projects in Hong Kong, it faces a deep cash shortage,” says E-house’s Yan. “He is on the verge of bankruptcy and is dependent on whether he can sell more assets in Hong Kong to prevent this from happening.”