China Daily Global Edition (USA)
Wanda continues to pursue lofty goals in US
Wang Jianlin’s giant company sticks to its core business of real estate, culture and finance; it also fancies US markets
Wanda Group likely will capture media attention again when its epic movie The Great Wall, produced by the famed Chinese director Yimou Zhang and an example of full-scale US-China collaboration, opens in the US on Friday.
The movie, which is the most expensive film shot entirely in China, with a budget of $135 million, was a production led by Burbank, California-based Legendary Entertainment, the movie studio and investment company that Wanda bought in 2016 for $3.5 billion.
Legendary has produced many global blockbusters, including the Batman trilogy, Jurassic World and Warcraft movies.
Wanda made a series of acquisitions in the United States last year, which also include Wanda-owned AMC acquiring Carmike Cinemas for $1.1 billion and becoming the largest movie theater chain in the US and the world, and buying Dick Clark Productions for $1 billion, a company known for producing the Golden Globes, the Billboard Music Awards, the Country Music Awards, American Music Awards and the New Year’s Rockin’ Eve show from New York’s Times Square.
Wanda also has a plan to buy one of Hollywood’s “Big Six” studios: Columbia Pictures, Warner Bros. Pictures, 20th Century Fox, Paramount Pictures, Universal Pictures and Walt Disney Pictures.
Wanda’s total spending in the US has exceeded $10 billion and it is said to employ more than 20,000 people.
Wang Jianlin, founder and chairman of Wanda Group, China’s largest real estate company, said at the World Economic Forum in Davos, Switzerland last month that Wanda is prepared to spend up to another $5 billion to $10 billion on overseas assets in the entertainment and sports sectors in 2017, with a priority placed on the US.
Wanda recently posted its sales in 2016, which fell 14 percent, the first drop in 11 years, while income from its global film operations increased by 31 percent.
The drop in revenue is mainly from Wanda’s domestic property business, which is facing a cooling real estate market in China amid the country’s transition to a more service-based, consumer-driven economy.
That, however, does not appear applicable to Wanda’s prospects in the US real estate market. Most attention so far has been paid to Wanda’s shopping spree in Hollywood. Few people know that Wanda also has substantial investments in luxury buildings in the US.
In May 2016, Wanda and Magellan Development Group, a Chicago real estate developer, announced that they will build a $1 billion skyscraper called Wanda Vista Tower, with Wanda contributing 90 percent of the investment, making it the largest-ever real estate investment by a Chinese firm in the Windy City.
94-story tower
The Vista Tower — set to be the third-tallest building in Chicago and highest built by a Chinese developer in the world — will be a 94-story, 1,200-feet (367-meter) high condominium and hotel complex and the seventh tallest building in the US when completed in 2020.
It will be located near the Lake Michigan shoreline south of the Chicago River, the most sought-after and pricey location in Chicago. The building includes 406 residential units, a 191-room Wanda Vista luxury hotel that occupies the first 12 floors, and some 9,000 square feet of retail space.
Chicago Mayor Rahm Emanuel called the project announcement “a very important day, a significant day for the city of Chicago, and (it) allows us to continue to be the destination for major international investment that creates jobs here”.
Developers said the project, which had a groundbreaking in the summer of 2016, will employ 2,000 construction workers and eventually 500 full-time employees.
According to Adam He, CFO of Wanda Chicago Real Estate LLC, which is Wanda’s investment arm in Chicago, 32 percent of all the condos were sold since Wanda Vista opened its sales center in November 2015, with the majority of the buyers local.
Condos above the 73th floor each comprise one whole floor, with about 7,000 square feet and a 360-degree view. Eleven of the 19 penthouses have been sold, a speed that surprised even the developers themselves.
Wanda Vista is a hotel brand under Wanda, owning and operating luxury 5-star hotels. Wanda is currently developing seven Vista hotels in the world, including in the US, UK, Australia and India. Wanda also has a super-luxury hotel chain, labeled Wanda Reign, as well as standard 5-star hotels called Wanda Realm.
Wanda acquired another real estate project in Beverley Hills, California in August 2014, bigger than the Chicago one in size and value. With an investment of $1.2 billion and total planned floor space of 110,000 square feet, the project will feature residential, hotel and other commercial components, to be completed in 2020 as well.
The sprawling building, called One Beverley Hills, was in a battle with the Beverley Hilton hotel, which is located right across Wanda’s planned property. Hilton objected to the project’s construction, citing the fact that the building’s loading dock will face the guest entrance to the Beverly Hilton. Wanda won City Council approval in November last year after a lengthy hearing process.
Wanda’s fast-paced actions have drawn the attention of US lawmakers. Sixteen members of Congress wrote a letter to the US Government Accountability Office in September last year, expressing concern about foreign companies investing in important US sectors such as the media industry, citing Wanda’s purchase of Legendary and AMC.
Facing up to critics
The letter sparked an outcry from industry observers. In an editorial published last October, headlined “Red Stars Over Hollywood”, with the subhead “Chinese investment in US movies isn’t a security threat”, The Wall Street Journal criticized the aim of the letter.
There were also some concerns about AMC’s future when Wanda acquired it in May 2012 for $2.6 billion, then the largest Chinese investment in the US, but Wanda seems to have taken a hands-off approach, and the business subsequently rebounded.
Before Adam He assumed the responsibility of overseeing Wanda’s real estate development in Chicago, he was Wang’s only envoy to AMC, bearing the title of deputy chief financial officer.
According to He, it was AMC’s shareholders who earnestly reached out to Wanda for taking over when the company was facing financial difficulty. Wanda had no footprint in the US before then.
To revive AMC, Wanda came up with three principles: keep the whole management team intact; give 10 percent of net profit to the core leadership; and upgrade theater features to enhance the audience experience. chairman
That gave AMC’s core leadership, up to 40 individuals, a great incentive to perform. In the first year of acquisition, AMC bounced back, swinging from a financially negative company to a moneymaking entity, generating a $55 million profit at the end of 2012.
CEO Gerardo Lopez’s compensation rose to $4.12 million for the first year, 2.37 times more than the previous year. His pay reached $6.76 million two years after the acquisition, according to the company’s financial reports.
AMC has been on a healthy track since. Its market value increased to $3.3 billion when the company made its initial public offering in late 2013.
“AMC is indeed our first-ever investment in the USA, and we succeeded, which laid a very good foundation for Wanda to go further in the following years,” said He, who once worked for Ernst and Young and was a CFO for a public real estate company on the New York Stock Exchange before joining Wanda in 2012.
Adam Aron, who became CEO of AMC Entertainment in December 2015, called Wanda “a dream shareholder” that has taken a hands-off approach to managing the Kansas City, Missouri-based chain.
“I was challenged as a new CEO of AMC to make AMC the biggest, best movie chain in the world. That was a very simple charge that I was given,” said Aron, who was the interim CEO of Starwood Hotels & Resorts Worldwide before it was sold to Marriott International.
Wang told attendees of the World Economic Forum in Davos last month, when discussing his public desire of owning one of the big six US studios, “It would still be a company run by Americans. We don’t interfere with content. I just want profit.”
To outsiders, Wanda’s investment in the US, particularly in the entertainment industry, may seem splashy. To He, Wanda’s US acquisitions and offers, however, align well with the goals the company has set for itself.
Founded in 1988, Wanda started as a small residential real estate company in Dalian, China. It has over the past 28 years developed into a $43 billion conglomerate sitting on multiple industries and a unique business.
On its official website, Wanda defines its core industries as commercial properties, culture and finance.
In commercial properties, Wanda’s reach goes beyond traditional hotels or office buildings. Domestically, Wanda is known to almost all Chinese for the Wanda Plazas it has built in cities throughout China, which provide shopping, cinema, restaurants, various leisure play stations, residences and office space — almost all the social functions one can think of.
Wanda also has a broad definition of culture, which can include cinema chains, movie production, tourism and sports.
Other than the entertainment and real estate investment, Wanda also grew its share in sports in the US.
In August 2015, Wanda spent $650 million on its acquisition of the US-based World Triathlon Corp, which promotes and licenses triathlon competitions. Less than six months after the deal, Wanda scheduled Ironman Triathlon, WTC’s signature program, in the Chinese cities of Xiamen, Fujian province, and Hefei, Anhui province.
According to He, it’s unusual for Wanda to venture into a project that does not fall within its core business in China or have the potential to develop in China.
estimated number of people Wanda employs in the United States I like the US. It is the world’s biggest market with lots of freedom, innovation and cultures.”
First-class multinational
With its core business generally defined, Wang’s long-term goal for Wanda is to become a first-class multinational corporation. His recent five-year plan maps out the short-term goal he has to reach that ambition, which He said can be summarized into a number code, 2211: By 2020, Wanda Group’s assets should reach $200 billion, market capitalization $200 billion, revenue of $100 billion and net profit of $10 billion. And, on top of that, 30 percent of Wanda’s revenue should come from outside China.
“I cannot find a better country to invest in than the US. No matter which party takes the White House, I will continue to invest in the US. I like the US. It is the world’s biggest market with lots of freedom, innovation and cultures,” Wang told CNN in December.