(Yicai) May 26 -- PAG, an alternative investment firm focused on the Asia-Pacific region, will establish a fund worth CNY50 billion (USD7 billion) to acquire 48 shopping malls from Chinese developer Dalian Wanda Group, according to a new report.

PAG will lead the fund platform, planning to inject CNY5 billion (USD700 million) to subscribe for subordinated shares of the fund, bearing primary risks while seeking excess returns, The Paper reported yesterday. A syndicate that includes big state-owned banks will provide CNY30 billion in loans, with the rest to be raised via mezzanine financing to attract diversified participants such as insurers and industrial funds.

Wanda has not yet commented on the matter.

The second anti-monopoly enforcement division of China's State Administration for Market Regulation unconditionally approved the set up of a joint venture by PAG Zhuhai Management Consulting Partnership, Gaohe Fengde Beijing Enterprise Management Services, Tencent Holdings, JD.Com-affiliated Beijing Panda Commercial Management, and Sunshine Life Insurance to acquire 100 percent equity in 48 targets held directly or indirectly by Wanda Commercial Management Group on May 6, it announced on its website on May 20.

The 48 projects include Wanda Plazas in first- and second-tier Chinese cities, including Beijing, Guangzhou, Chengdu, Hangzhou, Nanjing, and Wuhan. The transaction was unconditionally approved on May 21.

After the deal is completed, the ownership of the shopping malls will be fully transferred, while Wanda Commercial Management will continue to oversee daily operations. The transaction will likely be finalized by June 30.

The 48 projects vary significantly in regional distribution and business formats, creating uncertainty in maintaining rental income, with annual return projected at 6 percent to 8 percent, the report cited analysts as saying. However, as subordinated financing and mezzanine arrangements hold lower repayment priority, underperforming returns could pressure investors financially, they added.

Mezzanine financing refers to a hybrid capital instrument that ranks between senior debts and equity in repayment priority, typically structured as subordinated loans but occasionally taking forms like convertible notes or preferred shares.

PAG focuses on credit, market, private equity, and real estate. It operates 12 global offices and manages more than USD50 billion in assets for nearly 300 global institutional fund investors.

Editor: Martin Kadiev