Wang Jianlin on why the Wanda phenomenon works

(From Caixin)

China’s wealthiest person reveals the secrets of real estate success and plans for the future in an exclusive interview

By Li Xiaoxiao

Wang’s star rose even higher in October when he was named China’s richest person by the Hurun Rich List, a Shanghai-based wealth tracker, with 220 billion yuan in personal assets – 52 percent above his 2014 net worth.

Wang Jianlin

Wang Jianlin

Much of Wang’s success can be traced to Wanda’s rapid expansion over the past two decades. The company began as a residential real estate developer but later moved into commercial real estate. Subsequent business moves embraced the entertainment, sports and financing sectors.

Wanda’s knack for raising money from investors and racing to complete building projects earned the company sweetheart status among local governments in cities nationwide. As of January 1, Wanda’s real estate unit had built 125 Wanda Plaza commercial-retail projects nationwide. In the first half of 2015, the unit reported revenues of 73.4 billion yuan, up 12 percent from the same period last year.

Earlier this year, the company paid more than 15 billion yuan combined for stakes in the Swiss marketing firm Infront Sports & Media, the Australian cinema chain Hoyts Group, Atletico Madrid and the Chinese airline ticketing website

Wang was born in 1954 in Sichuan Province, the son of a senior Communist Party cadre. He spent more than 16 years in the military. In 1986, he returned to civilian life and landed a government job in Dalian, a port city in the northeast. Three years later, he started the predecessor of today’s Wanda Group and appointed himself chairman.

Wang’s dealings have not escaped foreign media scrutiny. In April, The New York Times said President Xi Jinping’s older sister, Qi Qiaoqiao, and her husband, Deng Jiagui, held stakes in Dalian Wanda Commercial Properties Co. Ltd., Wanda Group’s main operating arm, for years before Wanda went public on the Hong Kong Stock Exchange in December 2014.

While delivering a speech at a Harvard University open class on October 29, Wang credited Wanda’s business model and sound management for the company’s rapid growth. He also acknowledged that Xi’s relatives had invested in Wanda Commercial along with more than 10 other private investors. Altogether, these investors provided more than 4 billion yuan, making theirs the biggest private investment ever in a private Chinese enterprise. Two months before last year’s IPO, Wang said, Deng and Qi sold all of their shares.

After the Harvard address, Wang granted Caixin an exclusive interview near the university at a Boston hotel. During the interview, he described his company’s goals, including the quest for sustainable growth and new business opportunities in the financial sector. Excerpts of the interview follow.

Caixin: Wanda got its start in real estate but later expanded into entertainment, tourism and financial services. Why?

Wang Jianlin: Years ago, we started transforming Wanda based on our views of the real estate industry. Long-term and stable capital flows in this sector cannot be maintained. In many countries, the real estate industry usually grows for about 50 years and then starts to decline when the urbanization rate reaches 80 percent.

We initially expanded into commercial projects after residential project development because the former leads to a more stable flow of capital. But it’s risky to solely rely on selling property. So we decided to further diversify.

On one hand, we will reduce property assets. Before the end of this year, we will announce several deals. We will launch Real Estate Investment Trusts (REITs) on overseas markets. There are no REITs in the (Chinese) market, but we will launch a semi-REIT product later to provide a sustainable channel for capital flow.

On the other hand, in the process of growing Wanda’s cultural entertainment and tourism businesses, and with the development of online-to-offline (O2O) services, we have found possibilities for Wanda in the area of finance. We recently set up a financial division.

One of Wanda’s biggest advantages is its huge, offline resource (physical stores) with our large customer flows. We want to take advantage of this by setting up an Internet finance company under the financial division. It will include the e-commerce website and the online payment service 99Bill Corp. assets. We will also set up a credit ratings company. Read more

Categories: Asia Unhedged, China

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