Wanda Chairman Wang Jianlin shakes on the deal with Vanke CEO Yu Liang
Two of China’s biggest real estate developers announced a broad-ranging but vaguely defined cooperation agreement on Thursday that signals changes in both the property market and the region’s stock exchanges.
China Vanke and Dalian Wanda Group revealed that the two companies had signed a “strategic cooperation framework” to collaborate on projects both within China and globally with a focus on joint acquisition of land and cooperation on developments.
An announcement from Wanda, the primary holding company for Asia’s richest man, Wang Jianlin, did not cite any specific projects that the two companies would be working on together through the non-equity sharing cooperation.
The framework agreement comes as Chinese companies compete to grab the media spotlight during a surge in share values that has seen property shares on Hong Kong’s stock exchange rise by more than 20 percent so far this year, and mainland-listed real estate equities climb more than 40 percent.
Industry Giants Propose to Share Projects
Under the terms of the agreement between Wanda, which owns China’s largest commercial developer, and Vanke, which in 2014 was the country’s second-biggest seller of homes, will put together a joint team consisting of senior executives from both companies to work together on potential projects. A statement on Wanda’s website said that the deal would allow future joint projects to benefit from Wanda’s expertise in commercial developments and Vanke’s experience in home building.
Executives from Wanda and Vanke at the signing ceremony last week.
Wang Jianlin, Chairman of Wanda Group, said that, “Our strategic cooperation with Vanke is a first attempt at a brand new direction for the industry. For Wanda, through our cooperation, we will be able to focus on accelerating the implementation of our ‘asset-light’ business model.”
Vanke already has entered into a cooperation agreement with US private equity giant Carlyle to fund its own new series of shopping malls, and Wanda routinely includes a substantial residential component to its Wanda Plazas. The commercial developer recently announced plans to build 900 more such projects in the next decade. The cooperative framework does not appear to preclude the new partners from continuing to pursue developments independently.
Yu Liang, President and CEO of Vanke, added, “Our partnership with Wanda will enable Vanke to optimize their unique competitive advantages in the residential segment, securing more customers and development opportunities as well as enhancing our capabilities in commercial real estate, and thus driving our transformation to a more service-support orientated offering.”
Cooperation Announcement Comes Amid Flurry of Property PR
Neither Vanke nor Wanda made announcements to the Hong Kong stock exchange, where both groups have listed companies, regarding this new alliance. The statement Wanda provided on its website did not include projected figures for investment levels or other deal specifics regarding the cooperative framework.
The alliance, which was heavily covered in the Chinese press is the latest in a series of developments reported by Wanda, which has enjoyed a buoyant market for the company’s listed shares since Dalian Wanda Commercial Properties went public on the Hong Kong Exchange in December, and the group’s chain of movie theatres listed in Shenzhen in January.
Just last week it was revealed that Wanda had acquired a Monet masterpiece at auction in New York for $20.1 million, and Wang has been making appearances around China touting the property developer’s shift to an “asset-light” model, as well as predicting a ten-fold expansion in its fleet of shopping centres.
Wang also grabbed headlines in January for spending €40 million ($46.34 million) to take a 20 percent stake in Spanish football club Atletico Madrid, and followed up by announcing plans to help train Chinese youth to improve their soccer skills.
Wang and Wanda Profiting From Higher Profile
Wang has already seen his fortune rise from $24.2 billion last year to $36.2 billion (according to Forbes Rich List) thanks to rising prices for his two listed companies over the last six months, and the current rise of shares in Hong Kong and China could provide further opportunities for a windfall.
Other mainland developers have also been able to use PR campaigns to help boost their stock with enthusiastic mainland share buyers. Evergrande Real Estate, which has been widely criticised by analysts for its creative accounting practices saw its share price rise as much as 137 per cent this year thanks in part to a series of public relations maneuvers.
While its possible, if not probable, that Vanke and Wanda could cooperate on projects in the future, by announcing this potential alliance without waiting for the two sides to agree to work together on a single mall or housing block, these two Chinese real estate giants appear to be allying on share prices more than on future revenue generation.
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