NEW YORK – In a townhouse facing St. Patrick’s Cathedral in Midtown Manhattan, the power couple behind one of China’s greatest commercial property empires is writing the playbook for how to move a fortune out of the Communist nation.
Ms Zhang Xin and her husband Pan Shiyi, who grew Soho China into a behemoth that reshaped the country’s skylines, have built a discreet family office called Seven Valleys – named for the book written in Persian by the founder of the couple’s Bahai faith.
Two of its biggest assets are as iconic to New York as the architecture they developed in Beijing: stakes in the General Motors Building on Fifth Avenue and Park Avenue Plaza in Midtown.
Now, after the implosion of the Chinese property sector, the combined equity value of just these two investments – about half a billion US dollars – is roughly the same as the couple’s holding in the Beijing-based company responsible for their wealth, according to the Bloomberg Billionaires Index.
Ms Zhang and Mr Pan’s story is a case study in how to be prepared. Their five-part strategy – build a successful business in China, list it on a global exchange, pay out billions of dollars in dividends, set up a family office abroad and buy up foreign real estate – means their fortune is relatively protected while other Chinese billionaires have seen their riches crumble after running afoul of President Xi Jinping’s clampdowns.
“Many of China’s other real estate tycoons are likely jealous,” said Mr Brock Silvers, managing director at private equity firm Kaiyuan Capital, adding that the couple’s decision to distance themselves from the growing instability of China’s real estate sector was “prescient”.
Ms Zhang and Mr Pan are now fixtures of US society. They are often pictured attending high-profile sporting and social events, have both been senior fellows at Harvard University, and Ms Zhang is on the Council on Foreign Relations’ global board of advisers. They are also prominent philanthropists in China – something increasingly important for billionaires who want to stay in the regime’s good graces.
By contrast, their compatriots back home have seen their fortunes crushed. China Evergrande Group founder Hui Ka Yan has lost more than US$30 billion (S$41 billion) since 2020 and was forced to dip into his own pockets to help his operations, while Sunac China Holdings chairman Sun Hongbin is trying to put together a restructuring deal after the company defaulted on a dollar-bond payment.
China’s plan for a sweeping rescue package has brought some relief to developers this month, but only on the margins.
The couple have not been immune to the carnage. Last year, Blackstone decided not to proceed with a US$3 billion takeover of Soho after the Beijing authorities indicated the transaction would not be welcome and could impact the private equity firm’s future deal-making in the country, according to sources with knowledge of the matter.
Soho’s stock is down almost 90 per cent from its peak in 2007.
What saved their personal fortune was the decision to list Soho on the Hong Kong stock exchange in 2007 rather than in China, said four sources familiar with the matter. Goldman Sachs, whom Ms Zhang worked for in London after earning a master’s degree in development economics at the University of Cambridge, handled the listing.
Unlike with mainland China, where residents are given a strict annual overseas capital quota, money can move freely out of Hong Kong and be used to purchase assets abroad. The bulk of the payments made by Soho funded US real estate deals, the sources said. Most of the disbursements were between 2015 and 2017, including special dividends and return on capital.
The assets, staff and reporting requirements of Ms Zhang and Mr Pan’s family office are entirely in the United States, according to a source familiar with the firm. Seven Valleys also manages a portfolio of stocks, bonds, venture capital and private equity, the source said.
The GM Building, home of Apple’s Manhattan flagship store, is worth about US$3.2 billion, filings from majority owner Boston Properties showed this year, making it among the most valuable office towers in the US. The Soho founders have a 20 per cent holding, a source familiar with the matter said.
The couple in 2011 bought 49 per cent of Park Avenue Plaza, the 1.2 million sq ft building that houses firms including Morgan Stanley, property records show.
The couple’s US philanthropic efforts got off to a rocky start. They funnelled cash into sponsoring scholarships for Chinese students at Harvard and Yale University starting in 2014, triggering criticism on Chinese social media for not donating to the country where their fortune was built (each of their sons ended up studying at those schools).
Now, though, many of their donations are less controversial, such as educational programmes in Mr Pan’s home town in the north-western Gansu province. In September, Mr Pan stepped down from his role as Soho’s chairman and Ms Zhang resigned as chief executive, saying they wanted to focus on such philanthropic pursuits.
Their exit was “unusually elegant”, said Harvard Business School Professor Geoffrey Jones, who co-authored a case study on the couple’s philanthropy.
“It sort of chimes with Xi’s insistence that business has to do good and contribute to common prosperity, even though they have actually got a lot of their wealth out. So they are unlikely to face the kind of retaliation that rich families exiting are likely to face,” he said. BLOOMBERG