Banyan Tree ties up with Vanke to boost China plans

Partnership with Chinese developer aims to help it consolidate ownership of its assets

Hospitality company Banyan Tree Holdings is forming a "strategic partnership" with a large developer in China to boost its expansion there.

It is tying up with China Vanke to set up Banyan Tree China (BTC), a joint venture with an estimated initial paid-up capital of up to 2 billion yuan (S$414.2 million), it said yesterday. This will help to consolidate ownership of Banyan Tree-branded assets in China.

BTC will initially be a 50:50 joint venture through the injection of Banyan Tree Holdings' assets in China, which have a book value of about 720 million yuan. These will include three assets fully owned by the hospitality company - Banyan Tree Lijiang, Banyan Tree Ringha and Laguna Chengdu, which is still under development and will feature a Banyan Tree property.

The proposed deal will involve BTC owning 40 per cent of Banyan Tree's hotel management company in China and continuing to drive expansion of various brands under Banyan Tree Group, such as Angsana, Cassia, Dhawa and Laguna.

There are 10 Banyan Tree hotels and four Angsana-branded properties in China. Banyan Tree Jiuzhaigou is due to open in March.

Banyan Tree Holdings said BTC will, "at its discretion", invite owners of existing and upcoming hotels in China bearing Banyan Tree brands to inject their hotels into the joint venture under mutual agreement. Vanke may also inject hotels that it owns and hotels under development into BTC, it added.

It said the joint venture will develop and manage new hospitality, senior living and wellness projects.

"As China's economy matures, domestic and outbound tourism is set to boom, and many property developers are venturing into hospitality and tourism," said executive chairman Ho Kwon Ping. "China's demography is also prompting serious interest in senior living and active-ageing communities as part of a global trend towards wellness." He said this is an area where both companies have experience and could "do a lot more" in China and elsewhere.

Vanke - listed on the Shenzhen and Hong Kong stock exchanges, and one of China's largest developers - said there will be "many synergies" from the collaboration.

"We have over nine million home owners who keep in close touch with us, and they will be a big market for Banyan Tree hotels," said its president Yu Liang. "We have many mixed-use urban projects which could take on a Cassia or Dhawa."

Banyan Tree Holdings will also issue shares amounting to $25 million to Vanke by private placement at 60 cents apiece, giving Vanke a stake of about 5 per cent.

Vanke will nominate one director to the Banyan Tree Holdings board.

A version of this article appeared in the print edition of The Straits Times on January 24, 2017, with the headline 'Banyan Tree ties up with Vanke to boost China plans'. Print Edition | Subscribe