Property

The plot thickens

What’s left of Wanda after a year of brutal deleveraging?

Wang-Jianlin-w

Man of culture: Wang Jianlin

The month of January is so-called ‘nianhui season’ in China. Meaning ‘annual conference’, larger corporates hold company dinners with staff and shareholders to round off the previous year’s work. They are often followed by a press briefing.

The gatherings are generally viewed positively by corporate governance activists and Wanda Group is one of the firms that has been embracing the idea of nianhui. At the company’s gathering last January, its boss Wang Jianlin wept as he vowed to keep Wanda afloat by selling assets and cutting debt (see WiC395). But in the same event this month, he was in a more cheerful mood, although he insisted that Wanda would continue its withdrawal from property businesses.

“Wanda will exit the real estate market entirely in 2019. We won’t keep a single square metre of property assets,” he told reporters.

The strategy has seen the company selling to other developers such as Sunac and Guangzhou R&F. Its total assets have since shrunk to Rmb628 billion ($92.4 billion), compared to Rmb700 billion in 2017 and Rmb796 billion in 2016.

So what’s left on the books of a conglomerate which once took pride in being the world’s biggest developer (briefly overtaking Simon Properties in the US)? According to Wang’s latest work report, the “cultural industry” will become the group’s biggest revenue generator in the future. The core asset in this segment is Wanda’s film and TV business, which reported a 9.2% increase in revenues to Rmb58.1 billion. Wanda Cinema, a major shareholder in Kansas-based AMC Theatres, added 114 new theatres globally (105 in China). And although Wanda’s overseas shopping spree was a major contributor to its debt difficulties, the contribution from Hollywood’s Legendary Entertainment means that Wanda remains an active movie producer.

Then there’s sports. Wanda has continued with its quest to turn China into a sporting superpower by bringing top competitions to the country, like the China Cup, a football tournament that was held for the second time last year (and won by Uruguay, with China, Wales and the Czech Republic also taking part). Revenue from the segment grew 22.9% year-on-year to Rmb8.8 billion.

Wanda has also ventured into children’s education and entertainment. Over the past year, the company opened 132 Kidsplace Parks and 134 Kidsplace Early Education Clubs across China, which helped bring in Rmb2.1 billion in revenue, or a 44% increase from a year earlier.

Strictly speaking, Wanda has not given up on property entirely. Its new strategy is to become a “modern service company”. That has seen it turn from being a rent-seeking commercial landlord to more of a service provider to owners of major real estate projects, such as its Wanda Malls (these are now owned either by Sunac or Guangzhou R&F). According to Wang’s newest data Wanda derived a massive Rmb160.9 billion in income from property management services last year, up 75% from the prior year.

Wanda continues to work with local governments as clients. For instance, Securities Daily reported last month that a deal had been done with the Yan’an government to build a Rmb12 billion Wanda City in the former Maoist stronghold, featuring a “Red theme park” to promote “revolutionary tourism” and “patriotic education”. The park will commence operations in 2021 when the Communist Party of China celebrates its 100th anniversary.

Wang then concluded the news conference with the warning that journalists wouldn’t be invited to next year’s nianhui. “We are not a listed company at the end of the day [to Wang’s frustration, his hopes of relisting on China’s A-share market have been repeatedly delayed by regulators] and we thus have no obligations for disclosures,” he observed. “And more importantly, outsiders just keep second-guessing our plans and objectives and write whatever they want anyway…”


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