Profitability under question
In the eyes of Wang Wei, chairman of Shanghai-based commercial property developer MRD Group, Wanda's property sell-off indicates that the company is strapped for cash. "A real estate firm would not sell its valuable land assets unless it truly had to," Wang explained to the Global Times.
"The light-asset strategy is just a cover up for Wanda's financial difficulties," he said, estimating that Wanda will be lacking about 50 billion yuan to 55 billion yuan in its accounts by the end of 2017.
Wang from MRD also thinks that Wanda's commercial property model might have caused the difficulty.
The revenues from Wanda's commercial property sector declined 25 percent year-on-year to 143.02 billion yuan in 2016, according to a statement on the company's website.
Other experts also questioned Wanda's profit-making ability, pointing out that its revenues from its main business line - commercial real estate projects - have plummeted in recent years.
As more local and foreign property competitors swarm into the market and as China's e-commerce platforms boom, "the positive effects of Wanda's commercial property business model have since faded, even in third and fourth-tier cities," Song said.
Although the group currently operates 203 Wanda Plazas across China and will open 50 more by the end of 2017, as reported by domestic news website 36kr.com, experts warn that this move could be risky.
Against the backdrop of sliding revenue from the sector, experts pointed out that further plans to expand in the commercial property segment would inevitably further erode Wanda's profitability in the near future.
"For the past decade, Wanda's success was mainly buoyed by its rapid expansion, favorable subsidies from the local government, China's quick urbanization as well as its military-like, highly efficient execution ability, but these [reasons] are not sustainable [in the long term]," Wang from the MRD said.
Wanda is not publicly listed and the company has not disclosed its detailed financial statements for years.
According to a report released by Forbes on June 20, the developer's annual profit only sat at 750 million yuan last year, representing 0.4 percent of its revenues, a stark comparison to some of its domestic rivals such as Vanke, whose profit margin stood at 9.18 percent in 2016.
But mogul Wang has confidence in his company's business prospect. In another statement sent to the Global Times, he said that the group now owns 33 million square meters of commercial properties, with rent receipts expected to grow at an average annual growth rate of 20 percent over the coming five years.
Theme park failure?
With the sell-off of Wanda's tourism program, Wang's previous plan of transition to turn the developer into a major player in the tourism and entertainment industries seems to have been scotched.
One year ago, Wang vowed in an interview with China Central Television that Wanda's tourism programs would crush Disney's business in China. "Disney should not have come to China because a tiger cannot beat a pack of wolves," he said.
Referring to the current operation of Wanda's theme parks, Song opined that "[customer] traffic has been disappointing, not to mention the group's management loopholes and intensified competition from both domestic and foreign rivals."
Also, it's hard for domestic tourists, such as 30-something Beijing resident surnamed Chu, to fully immerse in the company's entertainment and tourism environments.
Chu visited Wanda's first tourism program - Wuhan Central Culture District - in Wuhan, Central China's Hubei Province in 2013.
"The characters in the amusement parks [inside the district] are like copycats…the parks have a mixture of traditional Chinese and Western characters and lack a sense of true familiarity and resonance among Chinese tourists," Chu told the Global Times Tuesday.
The park's operation has been suspended since August 2016 due to "upgrading and rebuilding."
As the group's pillar business hits the wall and its new ventures become less and less appealing, it may be a wise choice for Wanda, again, to scramble to transform itself, experts suggest.
"But it's hard to predict the prospect of the light-asset strategy, because Wanda is the first developer in the country to explore such a model," Song said.
Wang from the MRD sounds even more pessimistic.
"The development path of Wanda can be compared to a parabola, whereby the company is near a peak point, and what's left for it is a downward trend," he noted.
