China real estate M&A 2017 full year review Domestic M&A activity Outbound M&A activity Data illustration

Domestic M&A activity 3 目录Content Outbound M&A activity 14 Data illustration 21

China real estate M&A 28 March 2018 PwC 2 Domestic M&A activity Outbound M&A activity Data illustration Domestic M&A activity

China real estate M&A 28 March 2018 PwC 3 Domestic M&A activity Outbound M&A activity Data illustration

In 2017, the number of real estate M&A deals in China exceeded 480, and the transaction amount increased by 31% on-year basis , exceeding US$80 billion. The average transaction size increased significantly.

2015-2017 Domestic RE M&A deals number 2015-2017 Domestic RE M&A deals value 600 60% Unit: $bn 90 120%

81 102% 482 45% 453

62 400 60 80% 334

36% 30% 44

42%

200 30 40%

31% 6%

0 0% 0 0% 2015 2016 2017 2015 2016 2017 Deal Deal 交易数量 yoy 交易金额 yoy number value

Average value per deal Note：Only mainland China is included and M&A activities 130 137 168 excludes internal reorganization deals （$mn） Source：CV，Mergermarket， Thomson China real estate M&A 28 March 2018 PwC 4 1 Domestic M&A activity Outbound M&A activity Data illustration

In 2017, the value of real estate M&A deals greater than US$1 billion increased by 21%, and value of US$100 million to US$1 billion decreased by 17%.

2017 RE deals value by deal size Big domestic M&A deals in 2017 Announce Deal Value T arget Buyer Percentage Date ( US$m n) 10% 29/06/2017 Guangdong Intl Trust RE Guangzhou Wanxi RE Co 8,105 100% 14% Development Ltd (subsidiary of ) 22/08/2017 Wanda commercial Group 6,500 91% 31/05/2017 Holdings Strategic investors 6,300 15% Limited 12/01/2017 China Vanke Co Ltd Shenzhen Metro Group 5,359 15% Co Ltd 18/11/2017 Chengdu Global Century Yunnan Metro Re Dvlp 4,292 51% 44% Co Ltd 12/06/2017 China Vanke Co.,Ltd Shenzhen Metro Group 4,217 14% Co.,Ltd 19/07 /2017 7 7 hotels under Wanda R&F PROPERTIES 2,940 100% 61% business <1< US$100mn亿美金 06/06/2017 Jiayuan International Holdings Mingyuan group 1,504 16% 1US$100mn-10亿美金-1bn investment co. LTD 12/05/2017 Tianjin Shining Star Group Sunac China Holding 1,486 80% >10>US$1bn亿美金 limited 22/11/2017 Shenzhen Kangqiao Jiacheng Shenzhen Chuangjing 1,296 7 0% Invest Co 19/07 /2017 Huainan mining cindare real estate 1,131 100% industry(group)Co.,Ltd Co.,LTD. 27 /02/2017 Beijing Woaiwojia RE Brkg Co Kunming Sinobright 1,031 94% (Grp) Co 46% 14/06/2017 Hui Cheng Real estate Y ango 949 100% 28/12/2017 Shanghai Xingwaitan Dvlp Shanghai Intl Port (Grp) 915 50% Co Lt 25% 14/07 /2017 BADENGCHENG investment China Evergande Group 809 100%

28/11/2017 3 commercial properties of SUPER ALLIANCE 7 53 100% China Merchants Shekou 12/10/2017 Nanjing Hengxiang Ppty Co Ltd Fujian Kairuite Trading 609 65% 2016 2017 Co Ltd

Source：CV，Mergermarket， Thomson China real estate M&A 28 March 2018 PwC 5 1 Domestic M&A activity Outbound M&A activity Data illustration

In 2017, the expansion of RE companies and business transformation together contributes to the dynamics of M&A activities

Acquiring the target company's Real estate companies are facing property and land through the the transition from “buy, build and acquisition of the target company, sell” model to “sell or hold” model opening the channel for rapid access • Agile acquires Greenland Property to the target geographical market Management, due to the rapid • Sunac acquires property projects from development of property Lemmon International and Legend management and various value- Holdings, rapidly increasing land added community services reserves • Sunac China acquires partial equity in • Cinda acquires Huainan Mining Lianjia and enters long-term rental Industry property, entering Anhui and market, which meets the current Zhejiang Market policy orientation

Real estate companies continue to Companies seek new growth points integrate with other industries such outside the real estate business. They as financial, senior living, industrial change from the current heavy asset real estate, education, tourism, business structure to a light-asset healthcare and logistics model that focuses on tourism, • Suning invests in Evergrande so that finance, the Internet, and other major Evergrande increases its operational industries advantage in internet retail business • Kunming Department Store acquired • Greenland moves into multiple 5I5J, exploring Internet business industries such as infrastructure, • China Merchants Shekou establishes Explore diversify in the real estate business sector large-scale consumption, finance, real estate fund as its pilot project in to develop related businesses other than traditional healthcare, science and innovation real estate finance and light asset residential and commercial real estate • Sunshine City acquires shares of business • Vanke acquires ProLogis to Create the world's largest Shunde Science Park to explore logistics real estate development platform industrial property 资料来源：CV，Mergermarket， Thomson China real estate M&A 28 March 2018 PwC 6 1 Domestic M&A activity Outbound M&A activity Data illustration 1 In 2017, more companies achieved RMB 50 billion revenue and M&A is a quick way to realize scale growth

Number of China Top 100 RE companies by revenue

77

62 • The scale advantage of real estate lies in： − Better brand influence； 21 11 9 11 − More comprehensive operation ability； 3 3 3 - − Stronger financing ability and scale； < RMB<500 50亿元 bn RMB500 50-1000-100亿元 bn RMB1000 100-3000-300亿元 bn RMB3000- 3005000-500亿元 bn >RMB>5000 亿元500 bn − Stronger resource integration capabilities 2016 2017 • Top-ranking large-scale housing enterprises continued

2016-2017 revenue growth rate of top 200 RE companies to maintain rapid growth in 2017, and industry concentration increased further 68% • M&A is an important way for companies to achieve 56% 53% 55% revenue growth in a relatively short period of time, and the scale of target companies has also increased. 34% • Small scale companies (less than 50 billion revenue) grow much slower than the industry average 8%

>RMB500bn RMB300-500bnRMB100-300bn RMB50-100bn

Source：CRIC，CREA China real estate M&A 28 March 2018 PwC 7 1 Domestic M&A activity Outbound M&A activity Data illustration 2 Compared to traditional bidding and auction, enterprises can acquire land reserves through M&A at a relatively low cost, and can acquire large-area reserves in a relatively short period of time, consolidating the advantages of the existing real estate business and stretching out into core cities

Land supplies in 300 cities in China Recruitment is not allowed in land bid invitation, and property developers need use 100% of their own funds for auctions; acquisition companies are not subject to this restriction.

The threshold for land acquisition has risen, and the policy of restricting prices and restricting purchases throughout the country has reduced the willingness of companies to obtain land through auctions. Despite more Residence Commercial Major real estate developers are actively carrying out land reserves, and acquiring land companies can acquire multiple parcels and properties at one time, which gives them an advantage in land stocks 2016 122 mn m2 35 mn m2 supply, M&A activities Acquisition of land through acquisition of a company can often result in a lower cost (the target company's own risk and tax factors reduce costs) are still Up 4.9% Up 8.4% dynamic The land held by the acquired company often has a relatively advantageous location compared with the land under auction nowadays

2017 128 mn m2 38 mn m2 Acquisitioncan help buyers directly enter the local market

Case of increasing land reserve through M&A in 2017 Deal time Buyer Seller Target property Property and land acquired 2017 Yango Tibet Dingzun, 100% Huicheng’s equity 650,000m2 golf land, 114,200 m2 Nandu Guoji residence and more than 270,000 m2 planning area 2017 Fujian Kairuite Nanjing Hengxiang 65% Hengxiang’s equity 65,400m2 land reserve

2017 Tahoe Lifeng 100%Lifeng’s equity 707,200m2 land reserve Source：China Index Academy, public information China real estate M&A 28 March 2018 PwC 8 1 Domestic M&A activity Outbound M&A activity Data illustration 3 In recent years, real estate companies have achieved business transformation, model switching, industrial expansion, and new business transformation through mergers and acquisitions(1/2)

Why transformation Land cost remain high, real estate stocks have to be digested, the incremental market that can be developed is limited, overall profits of real estate companies have fallen, financing costs have risen, and profit pressure has increased.

Real estate companies are faced with the transformation from "taking homes to sell Different directions homes" to "sell and hold operations simultaneously ." They are also seeking new growth of transformation points outside of the real estate business, changing the current heavy asset business structure, and shifting to travel, finance, internet and other light assets models of the industry , and providing a better service platform for the real estate industry.

More real estate companies are acquiring mature brand properties, accelerate the Impact on acquisitions development of community-based value-added services such as property or advance the long-term rental market, while actively participating in real estate finance and light asset business, in the future more companies will be transformed through acquisitions

China real estate M&A 28 March 2018 PwC 9 1 Domestic M&A activity Outbound M&A activity Data illustration 3 In recent years, real estate companies have achieved business transformation, model switching, industrial expansion, and new business transformation through mergers and acquisitions(2/2)

• From the micro point of view: the brand value of real estate services, the differentiation of the real estate industry; from a macro point of view: the transition of residential products suppliers to better service providers.

• In June 2017, A-living and Greenland Holdings established a 80% strategic alliance, and A-living paid RMB 1 billion to purchase Greenland Property.

2 • In August 2017, Greenland Holdings injected RMB 1 billion into A- RMB 1 billion living and held 20% equity interest in A-living. Greenland Holdings agrees that from January 1, 2018 to December 31, 2022, A-living 20% will serve as service provider for Greenland Property and other 1 Pay RMB 1 billion priorities. A-living will also work with Greenland Holdings in areas such as community value-added services.

100% • A-living increased its investment in the property sector as one of the important initiatives in real estate diversification strategy. On February 9, 2018, A-living officially listed on the and became the first red-chip spin-off of H-share property services company.

*Note: "1" in the above figure indicates that the transaction time is July 2016, and "2" indicates that the transaction time is August 2017.

Source: Agile A-living Life Services Co., Ltd.

China real estate M&A 28 March 2018 PwC 10 1 Domestic M&A activity Outbound M&A activity Data illustration

In 2017, real estate M&A transactions continued to be led by corporate buyers. The activity of private equity funds increased, and the number and amount of transactions increased by 96% and 83% respectively

Dividing the number of M&A transactions 2014-2017 by Dividing the amount of M&A transactions 2014-2017 by investor type investor type Unit: deal Unit: $ billion

1 10 1 6 100 51 1 6

5 个人individual 个人individual 43 私募基金PE 0 私募基金PE 8 公司Corporate 公司Corporate 4 70 40 396 381 55

286 0 4 35 187 18

2014 2015 2016 2017 2014 2015 2016 2017

*Note: Contains only Mainland China; M&A transactions do not include internal restructuring transactions

Source: CV，Mergermarket， Thomson

China real estate M&A 28 March 2018 PwC 11 1 Domestic M&A activity Outbound M&A activity Data illustration

The regions with the highest real estate M&A transactions in 2017 were Guangdong, Beijing, Shanghai and Zhejiang, among which transactions in Guangdong, such as Vanke and Guangxin Real Estate, made the province become the region with the largest transaction amount in the year

Changes in Amounts of M&A transactions in Major Chinese Provinces 2015-2017 Unit: $ billion

82 • In 2017, Guangdong Province had the largest transaction amount of approximately US$19 billion, 其他Others an increase of approximately 111% compared to 2016, 62 39 followed by Beijing with a transaction amount of 山东Shandong approximately US$8 billion, and Shanghai ranked 16 Fujian 福建 third. 43 2 江苏Jiangsu 1 1 • Wanxi, the subsidiary of Vanke, acquired Guangxin 5 3 3 Real Estate to obtain core urban land resources, and 17 5 4 浙江Zhejiang

8 Shenzhen Metro took stake in Vanke was the two 9 北京Beijing 2 2 major M&A transactions of Guangdong in 2017. 2 3 9 广东Guangdong 4 19 6 上海Shanghai 14 8 6

2015年 2016年 2017年

*Note: Others include national transactions in 2017. There are a total of 12 national transactions in 2017 with a total amount of $18.915 billion. *Note: Contains only Mainland China; M&A transactions do not include internal restructuring transactions Source: CV，Mergermarket， Thomson China real estate M&A 28 March 2018 PwC 12 1 Domestic M&A activity Outbound M&A activity Data illustration

In 2017, the traditional channels for corporate financing (company debt and equity financing) were gradually tightened, the costs of financing were rising . Bank loans and trust loans have become the key channels for the financing of real estate companies. In addition, the real estate companies are also exploring overseas financing, ABS and other diversified channels.

Since 2016, the financing channels for companies in the real estate area have tightened With limited financing channels, real estate companies gradually shift to overseas financing significantly. Various national and local agencies such as the National Development and channels with higher average financing costs. In the case of unchanged policies, it is Reform Commission, the China Banking Regulatory Commission and the China Securities expected that more companies will shift to overseas financing. Regulatory Commission have formulated a series of policies to regulate the financing behavior Some real estate companies have also tried new types of financing such as ABS and REITs of real estate companies, including prohibiting illegal distribution or embezzlement of credit that revitalize stock assets to expand financing channels. funds into the real estate area, requiring the own funds to bid for land and inhibiting the over- financing in the market and so on. Amount of overseas loan issued by real estate Amount of loan issued by real estate companies and companies and changes in interest rates changes in interest rates Scale(￥ billion） interest rates Scale (￥ billion） interest rates 500 10% 3,000 7%

1,500 4% 250 5%

0 0% 0 0% 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 Amount of loan interest rate Amount of loan interest rate Equity financing of real estate companies 2015-17 ABS Issuance of real estate companies Scale(￥ billion） Scale(￥ billion） 1,678 1,800 400 1,397

1,200

200 600 367

53 10 29 - 2015 2016 2017 - IPO Allotment SEO 2015 2016 2017Q3

Source：CSC， Zheshang Securities China real estate M&A 28 March 2018 PwC 13 Domestic M&A activity Outbound M&A activity Data illustration Outbound M&A activity

China real estate M&A 28 March 2018 PwC 14 Domestic M&A activity Outbound M&A activity Data illustration

The number of overseas RE M&A transactions in 2017 decreased nearly half, while transaction amount exceeded 50 billion US dollars, an increase over 200%, leading to a significant increase in average transaction amount

2015-2017 Domestic RE M&A deals value 2015-2017 Overseas RE M&A deals number Unit: $bn 90 86 200% 60 300% 275% 52

139% 247%

60 100% 40 200%

46

36

30 0% 20 100% 15

-47%

4

0 -100% 0 0% 2015 2016 2017 2015 2016 2017 Deals Deals 交易数量 yoy 交易金额 yoy Number Number Average value per deal (US$ mn) 111 174 1,130

Source：CV，Mergermarket， Thomson China real estate M&A 28 March 2018 PwC 15 Domestic M&A activity Outbound M&A activity Data illustration

The increase in overseas M&A transaction amount and average transaction amount was mainly due to investment in Logicor and the privatization of GLP, the two mega deals over a hundred billion dollars The top 20 overseas M&A in the real estate in 2017 (according to the amount of the transaction) Amount Announcement Date Property Name Country/Regions Investor (Millions Dollars) 01/06/2017 Logicor 17 European countries Investa Property Group LLC 13,800 14/07/2017 GLP China, Brazil, Japan, USA Nesta Investment Holdings, L.P 11,680 01/02/2017 Central Gardens, Brisbane Australia R&F Properties Co., Ltd 4,800 01/03/2017 245 Park Avenue, New York USA HNA Holding Group Co., Ltd 2,210 01/02/2017 Land site at Ap Lei Chau, Hong Kong HK Logan Property & KWG Property 2,170 01/05/2017 develop Bandar Malaysia project Malaysia Dalian Co., Ltd 1,700 26/07/2017 Walkie Talkie UK Infinitus (China) Co., Ltd 1,588 01/03/2017 Leadenhall Building, London UK Holdings Limited 1,420 (Group) Company of 01/03/2017 Land site in Wong Chuk Hang, Hong Kong HK 1,260 China, ltd. 01/01/2017 Rockefeller Center, New York USA Investa Property Group LLC 1,030 01/04/2017 Logistics real estate Global HNA Airlines Group Co., Ltd 990 01/03/2017 Former site of Hong Kong airport HK HNA Airlines Group Co., Ltd 958 48 customized commercial properties are scattered 01/05/2017 USA China Life Insurance Co., Ltd 950 throughout the US in 21 states Residential site near Queenstown MRT station on Joint venture of Logan Property & Nanshan 01/05/2017 Singapore 722 Stirling Road Group 01/05/2017 Goodluck Hope’s 804-unit residential project UK Sun Hung Kai Properties 644 Pacific View Sdn Bhd’s industrialised 01/05/2017 Malaysia Country Garden Forest City (Country Garden) 619 building system (IBS) facility Dalian Wanda Commercial Properties Co., 01/06/2017 Nine Elms Square UK 611 Ltd 22/08/2017 Nine Elms Square UK R&F Properties &CC Land 606 01/05/2017 Former Sanyo manufacturing facility in Forrest City USA Shandong Ruyi Technology Group Co., Ltd 410 22/05/2017 20 Gresham Street UK Huarun Group Co., Ltd 410 Source：CV，Mergermarket， Thomson China real estate M&A 28 March 2018 PwC 16 Domestic M&A activity Outbound M&A activity Data illustration

Logistics and land acquisition were the top 2 type of transactions in overseas real estate M&A, and investments in business or residential properties in core areas overseas were relatively active.

Classification the proportion of overseas acquisitions’ Classification the proportion of overseas acquisitions’ number in 2017 by the use of property amount in 2017 by the use of property

Logistics. 6% Hotel. 9% Commerical. 19%

Residence. 11% Commerical. 41% Logistics. 51%

Land/Propery under construction. Land/Propery 27% under Residence. 2% Hotel. 1% construction. 33%

• The transaction amount per overseas logistics property deal is large, exceeding half of the amount of overseas transactions in 2017.

• R&F Group acquired Australia Central Gardens apartment building project (under construction). Chinese companies acquired the overseas residential property or land through M&A to mitigate the risks of local policies and regulations.

• These over 1 billion US dollars overseas transactions are for the landmark office buildings in the core of the central commercial cities of the western developed countries.

Source：CV，Mergermarket， Thomson China real estate M&A 28 March 2018 PwC 17 Domestic M&A activity Outbound M&A activity Data illustration

The rapid development of China's e-commerce led to the increasing demand for global logistics properties, and thus mega deals in cross-border M&A for logistics properties

Transaction Date Transaction Details 2017.June CIC announced the acquisition of all shares of the European logistics property company Logicor under the Blackstone Group at $13.8 billion, and it is the second largest real estate transaction ever in Europe. Logicor currently owns and operates the logistics property of 13.6 million square meters, located in 17 countries, of which over 70% is in UK, Germany, France and southern Europe. Amazon is one of its customers. 2017.July GLP (MC0.SI) Asia's largest logistics real estate giant ProLogis announced to be acquired by investors composed of Magnolia, Hillhouse capital, group, Vanke Group and GLP management at a per share price of 3.38 Singapore dollar, a total valuation of about $16 billion (about 79 billion yuan). After the completion of the transaction the company will be delisted from the Singapore Exchange. As of March 31, 2017, GLP had business in 116 major cities in China, Japan, the United States and Brazil, owned and managed about 54.92 million square meters of logistics infrastructure, managed of nearly $40 billion worth of logistics assets. In China, GLP had 252 parks, distributed in 38 major cities, a total area of properties around 28.7 million square meters, including the completed property of 17.5 million square meters, planned property of 11.2 million square meters, and land reserve of 11.9 million.

Logistics and warehousing demand rapid growth

• The online shopping penetration rate in China has further increased. In 2017, the online shopping transaction amount reached RMB 6 trillion, an increase of nearly 30%, leading to higher demand for logistics and warehousing investment.

• Meanwhile, the development of cross-border e-commerce also encouraged domestic enterprises to actively acquire overseas logistics properties.

• The Belt and Road promoted the construction of global transportation channels and expanded international cooperation especially with neighboring countries; the providing of infrastructure promoted the development of manufacturing industry, thus the development in ports and logistics industry.

Source：CV，Mergermarket， Thomson，iresearch China real estate M&A 28 March 2018 PwC 18 Domestic M&A activity Outbound M&A activity Data illustration

Main overseas real estate investments were still focused in major cities in developed countries such as US and UK

Typical overseas real estate investment in 2017

North Europe • One type of overseas real estate America investment focused mainly in major cities in traditional developed countries such as US and UK, aiming Hong Kong at the long-term profitability in 14 15 developing residential and high-rise apartments and acquisition of 4 properties to hold.

5 • Another type of investment was to develop mega projects and new towns 1 in developing countries. Currently, 7 South-east there are more than 15 projects on Asia going in Malaysia by domestic real

South estate companies such as Country America Oceania Garden, R&F Properties and Agile Group Holdings. Number of transactions in 2017

Source: CV，Thomson， CRIC，China Real Estate Assessment Center China real estate M&A 28 March 2018 PwC 19 Domestic M&A activity Outbound M&A activity Data illustration

Private real estate companies are the most active participants in overseas real estate M&As, and the participation of financial investors in overseas M&As has also declined

2015-2017 Overseas M&A numbers by investor category

46

7 5

23 • On August 4, 2017, the General Office of the State Council 4 forwarded the notice issued by the National Development 34 9 8 and Reform Commission, Ministry of Commerce, the 4 11 5 People's Bank of China, and Ministry of Foreign Affairs on 2015 2016 2017 further guidance and regulation of overseas investment, Private company Financial investor SOE “Guobanfa 2017 (Document 74)” restricting the overseas investment in developing real estate, hotels, studios, 2015-2017 Overseas M&A value by investor category Unit: US$ bn entertainment centers and sports clubs.

52 • In 2017, the main players in M&As were private real estate

16 companies, such as Vanke, R&F Properties, and HNA 2 Group.

12 34 • Of the overseas M&A transactions by state-owned 1 8 enterprises, 86% amount were CIC acquisitions. 3 2015 2016 2017

Private company Financial investor SOE Note: The number of overseas M&A transactions includes 3 undisclosed amount transactions • Source: CV，Thomson， CRIC，China Real Estate Assessment Center China real estate M&A 28 March 2018 PwC 20 Domestic M&A activity Outbound M&A activity Data illustration Data illustration

China real estate M&A 28 March 2018 PwC 21 Domestic M&A activity Outbound M&A activity Data illustration

Data illustration

• All data in report except noted ones are all based on information provided by Thomson Reuters, China Venture, and PwC analysis • Thomson Reuters and China Venture only record public announced transactions, some not disclosure transactions may not be included • Transaction amount mentioned in the report are public announced deals, regardless deal size are disclosure or not • The deal value amount mentioned in the report only include those deals that disclosure their deal value amount • “Domestic M&A” refers to non-restructuring M&A deals conducted in China “Outbound M&A” refers to China corporations acquires overseas corporations

China real estate M&A 28 March 2018 PwC 22 Domestic M&A activity Outbound M&A activity Data illustration

Data Collection Measures

The data in this report may differ with that in the previous report, as a result of the following: 1) After deal completion, Thomson Reuters and China Venture update historical data regularly; 2) PwC excluded internal deals within the group that do not involve real transfer of ownership; 3) Previous data were extracted from other sources Included deals Not included deals

• Ownership change due to M&A of listed or non-listed company • Property/Personal property • Investment on listed and non-listed company(at lease 5% stake) • Hearsay transaction • Merge of companies • Options to purchase additional stakes before 100% acquisition • Leaverage Buyout,Management Buyout,Management Sellout • Purchase of trademark use right • Company Privatization • Land purchase • Tender offer • Equity raising in fund market • Asset spin off • Mutual fund shares purchase • Spin off wholly owned subsidiaries through listed • Repurchase or write off listed shares in public market in non- • Ownership exchange due to asset stripping privatization process • Reverse takeover • Invest in new project • Recapitalization • Delisting transactions of listing companies • Overall acquisition of JV • JV • Bankruptcy takeover or auction • Tracking stock • Restructuring

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