During this week two of China’s biggest real estate developers – Dalian Wanda and Guangzhou Evergrande – have announced major investment plans.
And just in case some analysts are not yet convinced of the less-than-encouraging outlook for China’s property market, neither of the plans revealed by these two giant builders have anything to do with putting up more buildings.
The diversification by these two top-ten developers comes as China’s real estate market enters what many predict to be a prolonged slump. According to a private survey, the average housing price in China’s largest cities declined by 0.92 percent in September – the fifth straight month of falling prices.
Dalian Wanda to Set Up Film Fund
The larger of the two plans was revealed on Tuesday by billionaire Wang Jianlin’s Dalian Wanda Group which said that it was establishing a RMB 1 billion ($163 million) project financing fund to lure movie makers to its planned studio in Qingdao, China.
According to an account in The Wall Street Journal, they city of Qingdao will also provide funding for film and TV production at Wang’s Oriental Movie Metropolis project. The studio project attracted international stars such as Leonardo DiCaprio and John Travolta to its ground-breaking last year.
In addition to its film production venture, Wanda announced last month that it planned to join with online heavyweights Tencent and Baidu to launch a new ecommerce venture, as the developer looks for new ways to wring profits from its chain of more than 85 shopping centres in China.
Dalian Wanda has also been branching out into international real estate by acquiring sites and mature real estate assets in several foreign countries. In August, Wang confirmed his company’s latest overseas property project when Wanda stated that it had acquired a site along Wilshire Boulevard in Hollywood for a $1.2 billion mixed-use development.
Evergrande to Invest in Solar Energy
On the same day that Wanda made public its movie deal, Evergrande announced a nearly equal-sized leap into alternative energy.
In a statement to the Hong Kong stock exchange, the developer – which also owns the Guangzhou Evergrande football team – said that it plans to invest HK$1.2 billion ($154 million) into two solar power ventures.
According to a separate story in The Wall Street Journal, Evergrande will pay $30 million for a 3.95 percent stake in US-based photovoltaic firm SPI Solar. The company belonging to Guangzhou-billionaire Xu Jiayin (Hui Ka-yan in his native Cantonese) is also acquiring a majority stake in Chinese solar firm Guocang Group for HK$966 million ($125 million).
The solar investments by Evergrande come just over a month after it announced plans to invest more than RMB 100 billion ($16.2 billion) in China’s agricultural sector. The real estate developer said that it would spend the cash earned from its property business to develop and acquire new ventures in grain and vegetable oils, dairy, and animal husbandry.
Just today, Xu was reported to be in Cairns, Australia after having looked at high end real estate assets in Australia’s Gold Coast. The Evergrande boss was said to be interested in acquiring the five-star Sheraton Mirage resort there which was listed for sale in August for A$120 million ($106 million).
Wang Jianlin already made his own Gold Coast acquisition during August when Wanda purchased the Jewel project in Surfer’s Paradise for a $1.57 billion resort.
While both Dalian Wanda and Evergrande continue to invest in China real estate projects (Wanda is reportedly building 24 new malls in China this year) these latest projects indicate that real estate deals no longer outstrip all alternatives as a potential source of profits.
Some analysts have predicted that China’s current real estate slide is “unstoppable” and even more optimistic observers expect the current slump to last well into 2015.