Projects like the Changsha Kaifu Wanda Plaza could the face of things to come for investors
Fresh off of its $3.7 billion IPO last month, China’s Dalian Wanda Commercial Properties seems to have decided that it would rather bring in outside investors than fund its own projects.
According to a statement by the company to the Hong Kong stock exchange yesterday, Wanda Commercial has raised RMB 24 billion ($3.88 billion) from four domestic investors to fund 20 new shopping malls in China.
The announcement by Wanda means the commercial real estate developer is joining the growing ranks of Chinese real estate firms that are turning to financial partnerships to build their new projects, rather than relying on bank loans or pre-sales, as the country struggles with its deepest real estate slowdown to date.
Wanda Goes Asset Light
According to Wanda’s announcement, the developer is teaming up with the real estate investment arm of China Everbright, Harvest Capital Management, Sichuan Trust and KuaiQian Payment and Settlement Service to provide the cash necessary for its latest tranche of shopping malls.
Under the terms of the partnership, Wanda Commercial will be responsible for site selection, construction, tenant prospecting, operation and management of the new Wanda Plazas, as well as leasing the use of its trademarks. The five partners will then split the rental income from the projects.
By relying on partnerships to fund its projects, Wanda is following a path blazed by China Vanke and other developers in adopting an “asset-light” strategy which allows it to spread its project risks to investors while collecting a premium for its development expertise.
Vanke has already created a partnership with US private equity giant Carlyle to develop nine malls in China, as well as with Blackstone for developing logistics properties.
More Partnerships Could Be on the Way
According to Wanda’s statement, more such partnerships could be on the way in the future. The company indicated that it is in talks with several local and international investment banks, insurance companies and investment funds about supporting further projects.
Including projects still in progress, Wanda now has 159 Wanda Plaza shopping malls in 109 Chinese cites. Just last week the developer announced that it was closing 10 of its department stores due to poor sales, and would restructure 20 more.
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