Author | Meng Xiao

For more financial information | BT Finance Data Hub. The article has a total of 4,615 words and is expected to take about 12 minutes to read.

"Wang Jianlin seems to have another big move."

There were rumors a few days ago that "Wang Jianlin was exiting Wanda Plaza," but BT Finance has found that instead of retreating, Wang Jianlin is making another significant move.

According to Tianyancha, on April 18, Wang Jianlin added a new external investment project, taking a 100% stake in Zhuhai Wanda Ruichi Enterprise Management Co., Ltd. Previously, this company was Dalian Wanda Commercial Management Group. After Dalian Wanda's exit, Zhuhai Wanda Ruichi became Wang Jianlin's only 100% owned enterprise, which was only established in May 2023 with a registered capital of 50 million yuan. Its business scope is similar to Wanda Commercial Management, with the most prominent item being property management and non-residential real estate leasing services. It seems that Wang Jianlin has no intention of stopping but rather plans to go all out.

According to China Finance Network, on March 30, PAG Investment Group, CITIC Capital, Ares Management's fund (Ares), Platinum Peony, a wholly-owned subsidiary of Abu Dhabi Investment Authority (ADIA), and Mubadala Investment Company formally signed an investment agreement with Wanda Commercial Management Group. These five institutions invested a total of 60 billion yuan in Dalian Xindameng Commercial Management Co., Ltd. (Xindameng). After the agreement took effect, the five institutions held a 60% stake, while Dalian Wanda Commercial Management held a 40% stake. It was reported that the 60 billion yuan was paid in full, reflecting the institutions' confidence in Xindameng's future development and temporarily resolving Wanda's gambling crisis, but this meant that Wang Jianlin lost control.

How much money does Wanda need now? It can be seen from the assets sold by Wang Jianlin. After selling Wanda Films, a "cash cow," Wanda has also sold 16 Wanda Plazas. After selling Sunseeker International, a world-class luxury yacht company acquired in 2013 and achieving a new high in profits in 2023, Wanda's overseas assets have been liquidated. These disposed assets even include the Wanda Plaza located at Dawang Road in Beijing, which is the flagship store and a symbol of Wanda's corporate spirit.

Although there are still hundreds of Wanda Plazas nationwide, Wang Jianlin may have lost the right to sell as he pleases, as Zhuhai Wanda Commercial Management Group, Wanda's core asset, is a subsidiary of Xindameng. In recent years, Wang Jianlin has been striving for Zhuhai Wanda's listing with no success.

Unlike other real estate companies, Wang Jianlin did not choose to "lie flat" on the debt issue. Can he turn things around this time?

1

How much debt does Wanda have?

How much debt does Wanda have so far? There is no official data, but in 2017, some media reported that its debt reached 400 billion yuan. From the amount of debt, Wanda's debt is much lower than Evergrande's. Wang Jianlin sold 13 cultural tourism projects and 77 hotels to reduce corporate debt. Although he encountered setbacks such as Li Silian's price negotiations from R&F Properties, he ultimately realized a cash value of 63.75 billion yuan, aiming for the healthy development of the enterprise. However, with Wanda Commercial Management's four failed submissions, Wanda's debt situation remains grim.

As of the third quarter of 2023, Wanda Commercial Management's total assets were 611.583 billion yuan, and its total liabilities were 303.36 billion yuan, with a debt-to-asset ratio of 49.60%, which has almost reached the red line for Dalian Commercial Management's asset-light operation. Cash flow is less than 20 billion yuan, and interest-bearing debt is as high as 141.3 billion yuan, which cannot cover short-term debt with current cash flow.

However, it cannot be denied that Wanda Commercial Management is still a highly quality asset. Since Wanda Commercial Management has not disclosed its 2023 annual report, only the 2022 annual report and the relevant data for the third quarter of 2023 are used as references. In 2022, Wanda Commercial Management's total revenue was 49.314 billion yuan, with a net profit attributable to shareholders of 12.301 billion yuan, and a net profit margin of up to 25%. Among them, the net cash flow generated by Wanda Commercial Management's operating activities was 9.686 billion yuan, making it a solid cash cow. In the first three quarters of 2023, Wanda Commercial Management's total revenue was 38.826 billion yuan, with a net profit attributable to shareholders of 10.853 billion yuan, and a net profit margin of 28%. At the same time, the net cash flow generated by operating activities was 17.037 billion yuan, which is much higher than the full year of 2022. Wanda Commercial Management is expected to set a new record for net cash flow in 2023.

As of September 30, 2023, Wanda Commercial Management's total assets grew by 2.62% from the beginning of the year, while its total liabilities grew by 1.50% over the same period. The debt-to-asset ratio also dropped from 50.15% at the beginning of 2023 to 49.60%.

From over 400 billion yuan in debt to 300 billion yuan, Wang Jianlin is continuously reducing debt through asset sales, which is directly reflected in the decline in the debt-to-asset ratio, although the decline is not significant. Fortunately, the growth rate of total liabilities is lower than that of total assets, and Wanda is still in a stage where assets exceed liabilities, without touching the "insolvency" red line.

While continuously selling assets, Wang Jianlin is also actively seeking debt extensions. Securities Times once disclosed that in 2023, Wanda Commercial Management faced a concentration of 15.4 billion yuan in domestic public bonds and 400 million US dollars in bonds, totaling approximately 18.2 billion yuan in public bonds due. All payments have been completed on time. According to Wanda Commercial Management's announcement, the 600 million US dollar bond maturing on January 29, 2024 has also been successfully extended. Currently, there are only two US dollar bonds, one maturing in 2025 for 400 million US dollars and another maturing in 2026 for 400 million US dollars, with no immediate maturity pressure.

Investor Shi Baogang believes that Wang Jianlin's proactive response to debt reflects an entrepreneur's responsibility. "I don't think Wang Jianlin will fall. He can sell even the core assets in his hands, including the Dawang Road Wanda Plaza, which symbolizes Wanda's brand, showing his determination and courage. A septuagenarian working hard for debt to the point of losing weight can easily win the trust of investors, especially as Wanda's reputation is far superior to Evergrande. The combination of multiple factors gives Wang Jianlin the opportunity to make a comeback."

2

Selling Off Wanda Plaza

If Wanda Pictures is Wang Jianlin's son, then Wanda Plaza is his eldest son. Wang Jianlin once publicly stated in a 2019 interview, "I can let go of any enterprise, but not this one." This shows the importance of Wanda Plaza to Wang Jianlin. At that time, Wanda Commercial Management's annual rent was as high as 32.9 billion yuan, and Wang Jianlin optimistically predicted that the annual rent would exceed 100 billion yuan in a few years. "With this, Wanda Group can sit back and enjoy the ride no matter how turbulent the market is." Wanda Plaza was once regarded as Wang Jianlin's last lifeline.

In 2000, Wang Jianlin abandoned residential real estate and turned to commercial real estate. The establishment of the first Wanda Plaza on Chongqing Road in Changchun marked the beginning of Wanda Plaza's national expansion. However, from 2000 to 2005, Wanda Plaza's main business did not escape the shadow of traditional department stores.

Soon, Wang Jianlin keenly discovered that these retail formats similar to traditional department stores were too monotonous and difficult to develop, so he added cultural and entertainment elements, successively introducing cinemas, video games, mass KTV, and children's entertainment. The construction area also increased from the initial 50,000 square meters to over 500,000 square meters, with some larger Wanda Plazas even reaching one million square meters.

In this way, Wanda Plaza retained customer flow and created a one-stop shopping, dining, and entertainment business system. It obtained cash flow from the sales of residential properties, office buildings, and outdoor pedestrian street shops in the complex to invest in and hold shopping centers, solving the funding issues of traditional shopping malls.

After gaining a foothold in first- and second-tier cities, Wang Jianlin quickly expanded to third- and fourth-tier cities, and even the core areas of some counties were occupied by Wanda Plaza, leading to the saying that "Wanda Plaza is the city center." Nowadays, Wanda Plaza is no longer a single commercial project but has become a large urban complex encompassing hotels, office buildings, apartments, commercial districts, and more. Wang Jianlin has clearly tasted the sweetness from Wanda Plaza and accelerated its expansion process. It took Wanda 14 years to build the first Wanda Plaza to the 100th, but it only took 5 years to double the total number from 100 to 300.

In 2022, despite the overall economic downturn, Wanda Commercial Management's total revenue was 55.31 billion yuan, completing 99.6% of its annual plan and increasing by 7.4% year-on-year, with rental income of 50.85 billion yuan; shop occupancy rate of 98.7%; and rent collection rate of 100%. Wanda Plaza is the main component of Wanda Commercial Management's revenue, demonstrating its importance.

At this time, Wang Jianlin selling off his best and core assets further demonstrates his determination not to "lie flat." This resolute decision has won Wang Jianlin widespread praise in the market. Investor Liu Bo expressed sincere admiration for this move, "In 2017, when Wang Jianlin sold off hotels and cultural tourism projects, many people felt that Wanda was not optimistic. But it was later proved that Wang Jianlin's escape was incredibly wise, while the successors, R&F Properties and Sunac China, quickly encountered difficulties. This time, Wang Jianlin selling off core assets again is to recoup cash flow. Wang Jianlin's magic lies in his ability to make the best choices at every critical juncture. This sale is not the final outcome. If the market does not perform well, he can still repurchase at a lower price, not only solving the debt issue but also making a small profit."

3

Wanda's "White Knight"

Although the fame of this time's "white knight" for Wanda may not match that of Sun Hongbin and Li Silian, PAG Investment Group's Executive Chairman Shan Weijian, who led the transaction in the investment circle, is known as the "King of Chinese Private Equity" and has no less influence than Sun Hongbin, as his influence extends beyond the investment circle to other fields.

It is worth mentioning that Janet Yellen, the current US Treasury Secretary, was once Shan Weijian's mentor. He is also a professor at the Wharton School of the University of Pennsylvania. Nobel laureates Lawrence Klein and Ezra Vogel, economist Yang Xiaokai, and later Lin Yifu, the Chief Economist of the World Bank, and Zhu Min, the Deputy Managing Director of the International Monetary Fund, among other academic masters, have written articles for his journal, "China Economic Review."

Under Shan Weijian's leadership, PAG Investment has gradually developed into a leading enterprise in the field of Asian equity investment, managing assets of over 50 billion US dollars, involving multiple fields such as pharmaceuticals, finance, the internet, and entertainment. Its well-known investments include Bitauto, Home Credit, Tencent Music, and Nayuki's Tea. With steady investment development, PAG Investment has earned the title of "Asia's Blackstone."

Compared to Wang Jianlin's boldness and perseverance, Shan Weijian, who is only one year younger than Wang Jianlin, places more emphasis on education. "The more you read, the more knowledge you have, and it's easier to form judgment," is his creed. If given a choice between "100 million yuan and Tsinghua University," Shan Weijian would undoubtedly choose the latter.

A typical example occurred in 1980 when Shan Weijian faced his first life choice. One option was to work as a simultaneous interpreter at the United Nations with a salary of tens of thousands of US dollars. The other was to be a visiting scholar in the United States, where Shan Weijian's salary was only a few dozen yuan. Facing the temptation of a monthly salary of tens of thousands of US dollars, he chose the latter because he was more eager to learn. He later obtained a Master of Business Administration degree from the University of San Francisco, a Master of Economics and a Doctorate in Economics from the University of California, Berkeley, and finally became a professor at the Wharton School.

In Shan Weijian's works, he emphasizes the educational background of each character. Because he himself has read a lot, he prefers to associate with people who have read a lot. After becoming the Executive Chairman of PAG Investment, he also places more emphasis on education in recruiting partners. Unlike Wang Jianlin, who relies on practical experience, Shan Weijian purely changes his fate through knowledge.

Shan Weijian is clearly not just talking the talk. In 2004, Shan Weijian acquired a 17.89% stake in Shenzhen Development Bank for 2.227 billion yuan and later sold it to Ping An Bank for 16.4 billion yuan in 2012, making a profit of over six times in eight years. Forbes' 2023 Billionaires List estimated Shan Weijian's net worth at over 1 billion US dollars, while Wang Jianlin's net worth has severely shrunk to 47 billion yuan during the same period. Although Wang Jianlin's current net worth is still higher than Shan Weijian's, the amount of capital Shan Weijian can leverage is far from comparable to Wang Jianlin's, which is the key reason why Shan Weijian can serve as Wanda's "white knight".

Unlike the aggressive and risky investment strategies of Shen Nanpeng and Zhang Lei, Shan Weijian's investment strategy is relatively conservative. However, the usually prudent Shan Weijian chose to invest in Wang Jianlin's struggling empire, valuing Wanda Commercial Management's future potential.

Wanda Commercial Management once led the industry with nearly 500 managed projects, with a managed commercial real estate area of over 65 million square meters. Wanda Commercial Management's commercial plazas have a rental rate of 98.2% and a rent collection rate of 100%, both of which are the highest in the industry. Unlike New Metropolis Development, whose revenue mainly comes from the Yangtze River Delta region, and China Resources Vanguard and Joy City, whose commercial projects are mainly distributed in first- and second-tier cities, Wanda Commercial Management's regional layout is healthier. In terms of regional revenue, the east and north regions account for nearly 30% each, the south region accounts for about 25%, and the west region accounts for relatively less, close to 15%.

Wanda Commercial Management's profitability is also not to be underestimated. From 2020 to 2022, Wanda Commercial Management's revenues were 17.196 billion yuan, 23.481 billion yuan, and 27.12 billion yuan, respectively, with net profits of 1.112 billion yuan, 3.512 billion yuan, and 7.534 billion yuan. In the first three quarters of 2023, its revenue was 38.8 billion yuan, and its net profit was 11.057 billion yuan. Wang Jianlin's "asset-light strategy" has proven to be highly forward-looking during the real estate winter. In business terms, Shan Weijian's role as a "white knight" is also due to his recognition of this quality asset.

Wang Jianlin has handed over his stronghold, and this amputation is even more painful and humiliating than the first time, causing Wang Jianlin to lose face