Wanda Launches Online Investment Product to Crowdfund Malls

Dalian Wanda Group this week announced its first venture into online financing as China’s biggest commercial property developer looks to the Internet to fund a ten-fold increase in its fleet of shopping malls.

The real estate conglomerate controlled by Asia’s richest man, Wang Jianlin will launch “Stable Earner No.1” on Friday June 12th and will be marketing the Internet finance product via its 99bill.com platform which it purchased last year. The company says that it expects buyers to receive annualised returns of as much as 12 percent, funded by revenues from its Wanda Plaza shopping malls across China.

Wanda’s move to finance its projects by going directly to consumers is part of a new movement by the nation’s property developers to fund rapidly growing development costs, and aims to take advantage of the appeal of online investment products such as Alibaba’s Yu’e Bao.

Invest with Wang Jianlin for Only RMB 1000

To Wanda, the move to finance its malls over the Internet could be the start of something big.

“With a minimum initial investment amount of Rmb1,000 ($161), this project is revolutionary as it lowers the traditional minimum investment thresholds of commercial property, making it possible for ordinary investors to own quality property and share the hefty investment returns with leading commercial property developers,” the company said in a statement.

During April, Shanghai’s Greenland Group launched a similar online investment product of its own, and raised RMB 200 million ($32 million) within 30 minutes. Wanda announced its Internet agenda just days after Greenland’s successful launch, and said that the new online platform would be a key source of funds for its plan to increase the number of Wanda Plazas from 100 to 1000 in the next ten years.

Wanda did not specify how much money it is intending to raise through this initial foray into online financing, but they did indicate that funds invested in the product would be earmarked for new mall development.

Acting Like an Internet REIT

When Wanda announced its online funding intentions in April, Wang Jianlin likened the product to a REIT, and, while full details of Stable Earner No.1 are not yet available, the company’s statement does seem to endow it with some REIT-like characteristics.

Liquidity and the ability to sell onward ownership are key to the value of REITs, and Wanda says that Stable Earner No.1 investors will be able “to cash out of and sell their investment three months after the establishment of the project.” However, the company did not indicate the mechanism for such resales.

Any trading of the investment product as a security would presumably require the approval of the China Securities Regulatory Commission (CSRC), an eventuality that would land Wanda in a briar patch of red tape. However, the potential payoff of being among the first companies in China to sell tradable commercial real estate backed securities over the Internet wouldmake this an interesting challenge for Wanda, which has previously shown itself to be among China’s best connected companies.

Another REIT-like element to Wanda’s online offering is the potential for investors to benefit not only from rental revenues at the company’s Wanda Plazas, but also from any profits should projects be sold off. In its statement, Wanda said that, “Investors will be awarded with the right to profits from such plazas and enjoy double returns including shop rental and added value of properties of Wanda Plazas,” without specifying how such returns would be paid out.

Can Wang Jianlin Innovate Like Jack Ma?

By promising investors the ability to sell of their investment products and by offering flexible returns with the potential for greater upside, Wanda’s plan appears to be more daring than the approach taken by Greenland, the only other major developer to offer online financing products so far.

When offered in April, Greenland’s first Di Chan Bao product was structured more like a traditional debt product, and promised investors a 6.4 percent annual yield on a principal-protected note with a minimum subscription amount of RMB 20,000.

Both Greenland and Wanda appear eager to cash in on the success of online financial products such as Yu’e Bao, which is sold by Alibaba’s Ant Financial. By offering consumers frustrated by the low interest rates at China’s state-owned banks the opportunity to invest in higher yielding money market funds, Yu’e Bao grew to RMB534.9 billion ($86.3 billion) in assets under management by September of last year. While the fund’s growth has slowed since then, many other mainland companies have rushed to create similar types of investment products.