With Chinese stocks tanking after Xi consolidates power, a rough ride for master developer Greenland, as well as Alibaba (original source of Nets/ArenaCo owner Tsai's wealth)

The Atlantic Yards/Pacific Park project, including the Barclays Center, is significantly dependent, directly, and then more indirectly, on the wealth and performance of Chinese companies.

The master developer, Greenland Forest City Partners, is owned, nearly in full, by Greenland USA, an arm of Shanghai-based Greenland Holdings Corp. And their stock is tanking, most recently closing at a low, 2.67 yuan, according to Yahoo Finance.  

2 Week Range

2.6700 - 5.545

Meanwhile, the yuan has weakened considerably in the exchange rate with the dollar. 

Combine that with the company's junk-bond credit rating--CCC-, according to ratings agency Standard & Poor's last June, up three notches from Selective Default--and it's tougher to raise money and not necessarily wise to pursue new investments. 

That's part of the mystery as to why Greenland hasn't started the platform over the Vanderbilt Yard, as it said it intended as of May. Default might--though that's unclear--formally stall the project.

About Alibaba

The e-commerce company Alibaba, the main source of co-founder Joe Tsai's (owner of the Brooklyn Nets and the Barclays Center operating company) wealth, has a much higher credit rating: A1, upper medium grade, according to Moody's.

"The rating affirmation reflects the company's established brand name, leading market position in the e-commerce industry, track record of steady cash flow generation and prudent financial policy," said Lina Choi, a Moody's Senior VP. "These factors provide a strong buffer against intensifying competition and regulatory challenges."

That said, Alibaba's stock has been tanking, as shown in the chart below, from Yahoo Finance, closing below 64 yuan, though it was above 300 in 2020.

Tsai has invested in many other things, including real estate and private equity, so it's unclear exactly how painful this is. 

But a lowered price of Alibaba stock surely makes him more wary of cashing out Alibaba stock to fund--in the interest of longer-term gains--the performance of the Nets and the arena company.

Why stocks are tanking

As noted 10/24/22 by The Motley Fool, shares in companies like Alibaba have crashed because China's President Xi Jinping has maneuvered to get a third five-year term, consolidating power, and predecessors have had two-term limits.

From the publication:

"While Chinese politics have long been opaque, this sharp consolidation of power is adding to investor unease. Equity valuations, already near a 10-year trough, will likely face more pressure if international investors demand a higher risk premium," Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a recent research note.

Or as Bloomberg put it 10/26/22, Xi’s Vow of World Dominance by 2049 Sends Chill Through Markets:

It’s how Xi plans to get there that’s unsettling markets. Chinese assets plummeted earlier this week after the president surrounded himself with allies during the twice-a-decade leadership reshuffle, notably positioning Shanghai party chief Li Qiang as premier despite a lack of central government experience. He also signaled a shift of priorities from economic development toward security, heightening investor anxiety over how an unrestrained Xi will steer the country. 

But Xi’s road map is laden with contradictions: Boosting economic growth while locking down cities under Covid Zero; ensuring technological self-sufficiency while wiping $1.5 trillion off the tech sector; opening more to the world while restricting speech and capital flows. And perhaps the biggest of all, achieving this grand vision while also risking a catastrophic war over Taiwan to complete a “historic mission” and “a natural requirement for realizing the rejuvenation of the Chinese nation.”