Wang Jianlin explains why it’s better for other people to invest in his projects, instead of funding them himself.
Asia’s richest man, Wang Jianlin, has committed to investing RMB150 billion ($24.2 billion) into Chongqing to build 28 new Wanda Plaza malls and add a theme park to the fast-developing southwestern Chinese city.
Wang’s primary holding company, Dalian Wanda Group, signed an agreement on Thursday last week with the Chongqing Municipal government to develop the shopping centres, and a “Wanda Cultural Tourism City.” The deal would make Wanda the biggest investor in Chongqing and represents an eight-fold increase in the number of malls that the commercial developer has in the sprawling municipality of 29 million people.
Wanda’s plans for Chongqing are part of the company’s plans to increase its fleet of malls from 100 at the end of 2014 to 1000 by 2025. The company also has announced its intentions to build 10 tourist destinations across China, that would compete with Disney’s upcoming resort in Shanghai.
28 More Malls in Chongqing Plus 21 More in Sichuan
The strategic cooperation agreement between Wanda and the Chongqing authorities comes amidst a string of announcements since the Chinese commercial property developer listed new subsidiaries on the Hong Kong and Shenzhen stock exchanges in recent months.
At the end of April Wanda signed an agreement with the government of Sichuan, the province that surrounds Chongqing, to invest RMB 162 billion ($26.1 billion) to build 21 more shopping centres there, as well as a “Wanda Cultural Tourism City.” Announcements on Wanda’s website for both the Chongqing deal and the Sichuan agreement did not specify time frames for the investment plans or for specific projects under the plans.
According to Wanda’s announcement, the company has signed similar deals with governments in Guizhou, Guangxi, and Liaoning, which together with the Sichuan and Chongqing plans, call for building another 100 projects with a total investment of RMB 560 billion. In addition to its fleet of more than 100 shopping centres, Wanda is also one of China’s biggest developers of hotels, and its shopping centre projects typically involve office and residential space for sale, as well as retail stores.
A 43.6 percent rise in the price of Wanda Commercial Properties shares on the Hong Kong exchange has helped to boost Wang Jianlin’s fortune to an estimated $38.8 billion, according to Forbes. The increase in share values helped Wang to move ahead of Hong Kong’s Li Ka-shing to grab the title of Asia’s richest man. However, Wang’s Hong Kong-listed stock slid by 3.45 percent last week as investors became leery over the volatility in the high flying share market.
Building 49 Malls as a Service Provider
In its publicity surrounding the prospective southwest China deals, Wanda has pointed to the rapid ramp-up in its investment plans as part of its “asset-light” strategy, and the company’s shift from being a builder/investor into a service provider.
In its Chongqing statement, Wanda proclaimed that its “investment in Chongqing is mainly focused on modern services, a move that is in line with China’s future transition, which aims to stimulate growth in domestic demand.”
Asset-light was also the theme of an address Wang gave at an entrepreneurship forum held at the Shenzhen stock exchange last month. In his talk, Wang noted that the era of huge profits in China’s real estate industry has come to an end, and that “the best business is to do your business with investments from others.”
During that same month, Wanda announced plans for an online wealth management product that would offer retail investors the opportunity to buy shares in a “REIT-like” product that would give them payouts based on the revenues from the company’s projects. The commercial developer identified the online investment product as one way that it plans to decrease its own investment in its projects, in favor of taking on cash from outside sources.
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