Diversifying From Real Estate to Entertainment With Dalian Wanda Group

After leaving the military, Wang Jianlin found employment with district government in Dalian. Although he worked hard, according to him few promotions came his way.

Now he presides over an empire including malls in Los Angeles and Istanbul as well as cinema chain AMC, British yacht maker Sunseeker and a 20% stake in Spanish football club Atletico Madrid; Legendary Entertainment studio also belongs to his holdings.

Real Estate

Wang Jianlin founded Dalian Wanda Group with $80,000 borrowed, his timing could not have been more perfect. China was just starting its transition away from state-owned worker apartments towards private property development; Wang saw this opportunity and leapt right in at the ground level. When Premier Bo elevated football as a calling card for Dalian city, he purchased Dalian’s football team as it rose as one of China’s premier clubs over six years.

Since the early 2000s, he began diversifying into hotels and theme parks. More recently, he invested in ski resorts to tap China’s rising interest in this sport.

Wanda’s real estate holdings have long been a cornerstone of its strength, yet recent signals point towards their diminishment as markets evolve. Wanda has begun focusing less on high-margin markets like Tier One and Two cities for properties, instead opting instead for less desirable yet lower margin locations that offer lower margin returns.

These shifts have occurred alongside a slowdown in China’s economy that has forced many of China’s wealthy individuals to reduce spending and debt levels – something Wanda experienced last year with its largest ever loss.

Since the financial crisis, Wang’s company has seen its debt load skyrocket while its stock price remains stagnant, prompting speculation that she may seek to take its Hong Kong-listed property arm private.

That would require striking deals with investors linked to senior party leaders, and there is evidence of these deals in Wanda’s corporate records. For instance, in December 2010 a firm with links to one of Wanda’s cinema subsidiary’s members purchased a stake valued at $131 million according to company documents.

Soon thereafter, another Beijing firm with connections to another Politburo member made a similar investment. Both firms share similar addresses, staff members and phone numbers, as well as backing by investment funds that share one chairman. By Monday, their stake in Wanda’s film subsidiary comprised more than half its outstanding shares, according to Wanda records.

Cinemas

Recently, this property company has made efforts to diversify away from real estate by making forays into entertainment, sports and film companies on both sides of the Pacific. As an example, AMC Cinemas acquired in 2013 for $2.6 billion was owned by this group with plans to use AMC as part of a vertical integration strategy involving financing, production and distribution of Hollywood style movies for global distribution markets.

Wang, 61, is an impressive self-made billionaire that prime ministers are sending thank-you letters to and Hollywood stars rushing in when he summons them. Traveling around in his Gulfstream 550 private jet, Wang regularly rubs shoulders with political and cultural luminaries such as Chinese President Xi Jinping or Leonardo DiCaprio – as well as Hollywood celebrities such as Leonardo DiCaprio himself!

Federal investigators have also taken notice of Wang due to his close economic ties to relatives of senior Chinese party leaders and sprawling global business empire, both seen as potentially jeopardizing national security. As a result, there has been growing criticism that the government needs to review how its foreign agent law applies to him and his family.

Wang holds deep connections within Chinese leadership as both an ex-military officer and state bank executive, having served on both bodies simultaneously. He served as deputy to the 17th National People’s Congress, while also sitting on 11th Standing Committee of Chinese People’s Political Consultative Conference; additionally he is an active member of China Charity Confederation and All China Federation of Industry and Commerce.

Though he may not be in the public eye as often, Sunseeker Yachts International remains widely considered one of the wealthiest men on Earth with his personal fortune estimated at $34 billion by Forbes list. Based out of Beijing and with an entertainment-related business empire containing more than 86 theaters and several entertainment-related businesses. Sunseeker Yachts International produced boats featured in several James Bond movies; two 550-foot vessels owned by him can be seen here.

Hotels

Chinese billionaire Wang Jianlin built his fortune by developing luxurious hotels and resorts, becoming a five-star hotel chain owner and holding large sports and entertainment companies – his firm now owns many cinema screens, major sports teams and sports entertainment ventures as well. Additionally, the group is active in finance, culture and tourism sectors.

Wang recently upped his spending on entertainment, purchasing top Spanish soccer club Atletico Madrid and Legendary Entertainment — the Hollywood studio behind films like “Jurassic World.” China announced restrictions in August on overseas investments by large Chinese firms like Wanda that targeted real estate, hotels and entertainment industries; officials wanted to reduce risks that investors might make irrational or risky investments abroad that might destabilize China’s financial system.

Wanda remains active in foreign markets despite these limitations, opening its first luxury hotel in Los Angeles last year and expanding into Africa with plans for opening a property later this year.

Local officials work closely with Wanda as it provides them with tax revenue and projects can be launched quickly, according to people familiar with the matter. Wanda has even brought in celebrities such as Leonardo DiCaprio and Kate Beckinsale for launches such as Oriental Movie Metropolis in Qingdao which features an $8 billion mini-Hollywood.

Sunac will purchase 91 percent of 13 “cultural tourism projects” which include theme parks and leisure complexes as well as 76 hotels owned by Wanda. Wanda will continue to operate and manage these sites but won’t own them directly anymore.

Wanda is shifting away from its earlier strategy of trying to build cultural parks to compete with Disney, with over 300 parks already operating – many of them struggling to attract tourists.

Wanda did not provide an official explanation for their decision to sell off this portfolio, though Caixin speculated it may have been to relieve pressure on their property unit and increase stock valuation. This sale marks Wanda’s third asset sale this month – previous ones being London hotel project and stake in Australian luxury real estate development project.

Entertainment

Wang has also ventured into non-property income-generating businesses outside of property ownership, such as theater and movie production. Additionally, it has become one of the most aggressive Chinese firms when it comes to foreign acquisitions; most notably acquiring AMC Theatres as one such target.

Wanda Entertainment Investments have generated much anticipation that they could revolutionize global film distribution systems given its vast financial resources and access to China. Wang has stated his lack of interest in paying bribes to secure government favor and Wanda has survived President Xi’s anti-corruption campaign without suffering significant collateral damage; additionally it has protected its connections to senior officials such as Qi Qiaoqiao’s husband Deng Jiagui who served under him and was once one of Mao’s top military comrades.

Wanda Group has seen success investing both domestic and Hollywood movies, financing such films as 2015’s Southpaw with Jake Gyllenhaal as its leading actor. Additionally, Wanda is building an $8 billion mini-Hollywood in Qingdao with 30 sound stages, state-of-the-art postproduction facilities, temperature-controlled underwater studio stages for post-production facilities, as well as celebrity actors such as Leonardo DiCaprio to help promote its efforts.

But it is clear that Wang wants to spread “Chinese values” around the globe in an aggressive and often disconcerting fashion. He makes no apologies for trying to make Wanda into the largest entertainment company worldwide and has publicly attacked U.S. rivals like Disney in an arrogant manner.

Wanda Group Chairman Dai has made waves recently with his ambitious plans to shift their focus away from real estate and toward key domestic services sectors by 2018, ultimately shifting two-thirds of sales towards these areas by 2018. However, whether this transformation succeeds is still uncertain. Timing and execution must also play a factor, while how well the group weathers the ongoing stock market turmoil. For it to work successfully investors will need patience for it take some time for Wanda to produce profits in its new areas before seeing return on their investment.