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What the Vanke-Wanda partnership means for New York

China experts analyze the coming together of two development giants

June 02, 2015 02:11PM

By Ariel Stulberg

http://therealdeal.com/blog/2015/06/02/what-the-vanke-wanda-partnership-means-for-new-york/?utm_source=rss&utm_medium=rss&utm_campaign=what-the-vanke-wanda-partnership-means-for-new-york

上个月,中国最大的地产开发商,大连万达集团与万科集团宣布进行战略合作。2014年,万达的总资产高达856亿美元,拥有2.25亿平方英尺的地产面积。万科则有820亿美元的总资产和4.1亿平方英尺的地产面积。行业专家认为他们的联合终将会影响到两家公司在海外市场的拓展,尤其是在像纽约市的全球性城市。

两家公司是中国最成功的公司之一。2014年,万达的收入为388亿美元,万科为236亿美元。然而两家公司也都感受到了中国房地产市场的疲软趋势。万科2015年第一季度的纯利润相比去年同期下降了60%,为1.05亿美元。尽管利润空间下降,万达在2014年纯盈利210亿美元,相比2013年上涨14%。在过去的几年当中,万达和万科都声称正在向“轻资产”战略转型并且吸纳外来资本来购买土地和将重心放在租金利润与管理服务。

目前万达与万科的“轻资产”战略主要集中在中国。到2013年为止,万科在海外购买了6处地产,一处位于新加坡,一处位于香港,纽约和旧金山各两处。万达在伦敦,马德里,洛杉矶,芝加哥和悉尼拥有7项资产。两家公司也有不同的商业目标。万达的发展集中在酒店和旅游方面,尤其希望将万达的品牌效应利用在中国消费者想要前往的地方,而万科则侧重于中国人想要居住和拥有地产的地方。

有理由相信两家公司在国际市场的拓张都将会持续。2014年,中国投资者在纽约的资产投资额为30亿美元,2015年的预期将会大幅度高于该值。只要国内房地产市场的疲软持续,两家公司都会继续放眼海外的高回报机会。

Vanke Wanda

From left: Wang Jianlin and Wang Shi

China’s largest real estate developers, China Vanke and Dalian Wanda Group, operate at a scale that makes New York’s giants look small.

Wanda’s assets in 2014 totaled $85.6 billion, according to the company’s website, with a portfolio of more than 225 million square feet. Meanwhile, Vanke’s assets totaled $82 billion, with a portfolio of 410 million square feet according to Fitch. Last month, the two firms announced an alliance  that industry experts told The Real Deal could eventually have a significant impact on their international activity, especially in global hubs like New York City.

“It would not be one small building here, one small building there,” said Vincent Mo, CEO of SouFun Holdings, one of the largest internet real estate portals in China. Representatives for Wanda declined to comment for this story, while representatives for Vanke didn’t respond to several requests for comment.

Why bother?
Both firms are among China’s most successful companies. Wanda’s revenue hit $38.8 billion in 2014, while Vanke’s was $23.6 billion, with $34.7 billion in sales (Vanke only counts sales as revenue when development is completed). Wang Jianlin, Wanda’s chair and founder, is Asia’s richest man, with an estimated fortune of more than $35 billion.

Still, both companies have felt the effects of a slumping Chinese housing market. Vanke’s first-quarter net profit fell nearly 60 percent year-over-year in 2015, to $105 million. Wanda reported an annual net profit of $2.1 billion in 2014, up 14 percent over 2013, despite narrower margins from sales, on the strength of its leasing and management business, according to a press release. The company does not issue quarterly reports.

“The old model was: ‘If you build it, they will come.’ That model is played out,” said Patrick Chovanec, chief strategist at investment advisor Silvercrest Asset Management and a prominent commentator on the Chinese economy.

In the past year, both Vanke and Wanda announced they were shifting to an “asset-light” strategy, and will seek outside capital for land purchases while focusing on rental income and management services.

“They’re not growing as quickly. The cash flow from sales that’s needed to cover the investments in the property is very high. They want to get away from having to put a huge amount of capital into every project,” said Su Aik Lim, director of Asia Pacific Corporates at Fitch Ratings.

Lim described the new strategy as “asset-lighter.” While cash flow still funds the bulk of Wanda and Vanke’s business, both firms have also deployed REIT-like securitized loans, and both are looking to get into crowdfunding.

“There is such a wave among Chinese companies which is also encouraged by the Chinese government,” said SouFun’s Mo, who has worked with both companies for years.

The companies’ partnership will allow them to pool capital and spread risk, Lim said, while also allowing them to share their expertise and investor network.

World citizens
So far, Vanke and Wanda’s asset-light strategy is focused within China, Lim said. Abroad, “they’re still investing quite heavily on their own.”

Since 2013, Vanke bought six major properties outside China, according to Real Capital Analytics: in Singapore, Hong Kong, and two each in San Francisco and New York. Here, it paid $125 million for a controlling stake in the 30-story Bryant Park office building known as Bush Tower, and bought into Aby Rosen’s 100 East 53rd Street, a Norman Foster-designed condo project. On both its San Francisco projects, it teamed up with Tishman Speyer.

Wanda owns seven properties outside China, according to Real Capital data: in London, Madrid, Los Angeles, Chicago, and Sydney.

Wanda is also active in other industries. It owns the British yacht maker Sunseeker, the Swiss sports marketer Infront Sports & Media, and AMC Theaters, the largest theatre chain in the U.S.

Going big in the Big Apple
New York is “definitively one of the important markets’” for both companies, said Mo, who’s worked with both companies for years.

In 2013, Jianlin announced Wanda was in talks with potential partners to build a luxury hotel and an adjacent apartment building in Manhattan, according to Reuters. That deal never panned out.

A project in Sydney that did come to pass, however, offers insight into the firm’s approach.

This January, Wanda bought a pair of adjacent buildings near the Sydney Opera House for a combined $383 million. Wanda said it is investing about $1 billion to build a five-star, 160-room hotel with accompanying luxury apartments and retail space.

Wanda’s luxury hotel and apartments project in London, at One Nine Elms, purchased in 2013, followed the same prime-location, luxury-mixed-use blueprint.

Wanda and Vanke “have been disciplined,” said Borja Sierra, U.S. head of capital markets at Savills Studley. “They’ve said no to a lot of opportunities. They don’t only want to have an asset. They want to buy the right place.”

Relatively speaking
Still, there’s plenty of reason to remain skeptical. Several experts highlighted the relatively small profile of overseas properties on both firms’ balance sheets. They own a combined 13 real estate properties outside China, while at home, Vanke owns 367 properties and Wanda 244, according to Real Capital data.

The companies also have a different mission abroad than they do at home.

“They see their investors going abroad, and they follow,” said Silvercrest’s Chovanec. “The government is telling everyone to go global, [and they think] ‘we’ll go global too.’”

In the short-term, Vanke and Wanda will continue to team up with local partners on their international investment, Mo predicts.  “They’re accumulating experience,” he said, and “will not try to do everything themselves.”

And outside China, other barriers could make it tough for them to operate at the scale they are accustomed to.

“In other markets it’s not so easy to develop megaprojects,” said Omer Ozden, a managing partner at Beijing Capital Equity and former executive director of acquisitions for Xinyuan Real Estate. “It depends on the type of economy, the type of political system.”

Moreover, the two giants have different business objectives. Wanda is focused on hospitality in major tourist centers, and is “interested in taking advantage of their brand in places where their customers — especially their Chinese customers — want to visit,” Ozden said. In contrast, Vanke is focused on “places Chinese want to live or own property.”

Either way
There’s every reason to think both companies’ international moves will continue. Chinese investors spent $3 billion on New York properties in 2014, and experts predict that 2015 activity will dwarf that figure. And as the slump back home continues, the companies will eye greater rewards abroad.

And if they do join forces, Sierra believes there’s much more to come. “They’re great companies with great teams in the U.S.,” he said. “If they were powerful before, now they’ll be super-powerful.”