Leasing out retail space is as easy as selling colored sugar water to babies, or at least it looked that way to China beverage magnate Zong Qinghou when he opened his first Waow Plaza mall in Hangzhou in 2012.
Now the billionaire once ranked as China’s richest man is retreating from his company’s earlier plans to open a chain of 100 shopping centres, after failing to pay rent on its rented mall in Hangzhou for more than six months.
During 2012 Wahaha announced its plans to expand into retail real estate with an initial RMB 1.7 billion (U$272.2 million) investment, including a RMB 70 million (US$11.3 million) deposit on renting a 35,000 square metre shopping centre in Hangzhou’s Qianjiang New Town area.
However, according to a report this week by Beijing-based China Real Estate Business, Wahaha later asked that its rental deposit be applied towards rent, a request that its landlord refused. Following that failed renegotiation, Wahaha and then informed its partner in early May of this year that it would unilaterally terminate the 16 year lease contract more than 14 years before the termination date.
Although Wahaha was paying only RMB 2.0 (US$0.32) per square metre per day – low by local standards, the design and location of the mall, as well as the leasing strategy followed by the neophyte property managers, were inadequate to bring the venture to profitability.
When announced by Wahaha in 2012, the Hangzhou project was held out as a pilot project for a planned chain of 100 Waow Plazas which it planned to open within the next three to five years. Besides the Hangzhou centre, Wahaha also succeeded in opening a second Waow Plaza in Changsha. The fate of that outlet has not yet been reported.
In statements to the press at the time, the malls aimed to specialise at making European fashions accessible to buyers in China’s emerging cities.