Wanda Guard The Three Or Four Line City "Entrance"

Wanda Commercial Real Estate prospectus shows that its shopping malls not only cover most of the second tier cities, but also go deep into the three or four line cities in the mainland. If a multinational brand wants to cover the whole retail market in China in a short time, Wanda is undoubtedly the best guide. Moreover, most Wanda Plaza is now out of the "breeding shop" stage and will have the opportunity to win more small and medium sized brands willing to pay high rent in the future. In addition, if Wanda Commercial Plaza can cooperate with its future financial business to provide loan services to small and medium-sized tenants, it will have a stronger position in terms of rent negotiation and competitiveness.

　　 Property sales fell to 70%

In September 16th, the Hongkong stock exchange disclosed the prospectus for Wanda Commercial real estate. Prospectus shows that as of June 30, 2014, Wanda Commercial Real Estate in 29 provinces (cities, districts) of 112 cities layout 178 commercial projects, covering Wanda Plaza, shopping centers and luxury hotels.

Data show that Wanda currently owns 14 million 700 thousand square meters of property and how to give full play to the effectiveness of large scale property is one of investors' greatest concerns. Insiders told the "daily economic news" reporter that Wanda's familiar mode was "selling rent", and quickly sold the property to make up for the pressure of recycling rent. The high turnover mode makes it more similar to those of other pure residential developers. In recent years, Wanda has been gradually reducing its dependence on property sales. The proportion of property sales in total business has dropped from nearly 90% in 2011 to nearly 70% in the first half of this year.

Cheng Weixiong, chief consultant of Shanghai Liang Qi Brand Management Co., Ltd. served as a brand executive of Metersbonwe and Bosideng [-0.87%]. He observed that some clothing brands appeared in Wanda's department stores, but also in the "inner street" of Wanda Plaza. The shops along the street could receive higher rents, while the rent in department stores was not easy to upgrade. At present, most of the tenants in Wanda are local brands and international two or three line brands.

"Wanda's collection of rents is usually based on snap points, and there are not many cases of fixed rents." Cheng Weixiong said. When Wanda and tenants negotiate, some well-known brands are still strong. They generally do not accept the "bottom guaranteed" rent mode. The so-called "bottom protection" is the bottom line of the rental market. When the tenant business is very poor, the rent calculated by the deduction method is lower than the bottom line, and the rent equivalent to the bottom line still needs to be paid.

　　 Cheng Wei hung It is pointed out that in the cooperation with Wanda, there are certain maneuverability in tenants' choice of department stores or inner streets, the choice of deduction points or fixed rents, and whether the rent is guaranteed or not. Sometimes, in order to develop in the long run, Wanda will concession to the big brands, and the multiple factors will result in the rent level not too high.

Prospectus shows that the rental rate of Wanda shopping center has been maintained at a high level, 2011, 2012, and 2013 all exceed 99% in the first half of 2014. In recent years, the rent level of Wanda has also increased steadily. The monthly rent of the square meter has risen from 57 yuan to the current 75 yuan, which is equivalent to 2.5 yuan per day.

RET Chen Xi, general manager of China commercial real estate research center, commented that Wanda's property return rate was not high. "Wanda Commercial real estate has far more property than Sun Hung Kai, but the total profits of the two companies are almost flat."

However, this is only the current situation of Wanda's "raising shop" stage. According to the securities market weekly, Wanda will soon step out of the "foster shop" period. In the future, more and more small and medium commercial brands that can not afford to pay higher rent will be selected, but there will be more adjustments in the way of leasing.

　　 The entrance of three or four line cities

Prospectus disclosed that at present, Wanda has more than 15000 rented shops. The main tenants include supermarkets, electronic products, cinemas, Cara OK, chain restaurants and so on. They are leased to 2600 brands, and 2000 brands of Wanda are included in the "brand library".

Wei Min real estate Cai Min Min told the daily economic news reporter that Wanda is still in the stage of active expansion, and that Wanda Plaza should be opened to cities all over the country and at a lower level. In his view, Wanda before the listing, in order to get a higher valuation in the capital market, investors need to give a large scale, a deep rooted impression. Therefore, making plates is a top priority, which is more important than the rental return rate. Wanda hopes to gather a group of loyal followers. Every new city will soon gather a group of powerful tenants.

Wang Yuke, senior director of RET Rui Yide, believes that the core of the development of commercial real estate is to find a profit model approved by the market. After all, the capital market values expectations. But at present, most of the domestic business models are still in the exploratory stage. According to the data disclosed by Wanda, its shopping center does not make money, especially hotels and stores. Last year, Wanda Commercial real estate revenue was 145 billion 620 million yuan, of which real estate business, including apartments, shops and office buildings, accounted for 126 billion 250 million yuan, rental income was only 8 billion 560 million yuan, accounting for 5.87% of total revenue, while the rental income of Tai Koo and Sun Hung Kai last year was HK $9 billion 673 million (about 7 billion 647 million yuan) and 9 billion 78 million Hong Kong dollars (about 7 billion 176 million yuan), of which the proportion of Taigu rental income to the total income was 74.8%.

But Wang Yuke ignores Wanda's strategic value for the global brands that want to go deep into the mainland of China. Wanda has commercial projects in 112 cities across the country, which means that as long as we can get Wanda's support, we can quickly roll out the market in 112 cities across the country. This is undoubtedly a strong attraction for the new brands entering the market that need tens of millions of dollars and even hundreds of millions of yuan to popularize the market.

In fact, at present, Wanda's large number of three or four line cities have long been a new blue ocean in the retail market. Liu Yunliang, chief executive of Mercedes Benz, told the media that 10 of the 15 fastest growing cities in China in 2013 were three or four cities.

From Mercedes Benz, BMW, Tesla and other luxury brand cars to private aircraft, yachts, to high-end beauty salons, the three or four line city wide market and rising purchasing power will be a great temptation to those global brands that can pay high rent. If Wanda can further enhance the global brand resource pool by listing, it is not impossible to raise rental income rapidly in a short time.

According to Wang Jianlin's statement at the end of this year's meeting, Wanda will start developing financial business from the second half of the year. Zhang Huadong, deputy director of the listed real estate research center of Yi Han think tank, believes that if Wanda's finance is like Ali's small loan, the supply chain loan to the leasing Wanda Plaza can greatly enhance the bargaining power of its rent.

At present, the mode of commercial real estate is: developers pay rent for large brands and collect high rent premium to small and medium-sized brands. If we increase the proportion of small and medium sized brands in the existing leasing structure of Wanda, the rental revenue will hopefully increase substantially.

　　 face Format adjustment difficult problem

Wanda Plaza in most 234 line cities is located in the core position of the city. This is a great advantage of Wanda Commercial real estate. However, if we want to turn this advantage into a rental income, Wanda also needs to make an in-depth study of the consumption habits and consumption characteristics of the three or four line cities, so as to suit local conditions.

Ouyang Jie, vice president of Xincheng holding group, told the daily economic news that the proportion of young people in different levels of cities is different. Many young people in three or four line cities work in a second tier city. Therefore, shopping centers and shopping centers in second tier cities need to be more fashionable, updated and faster. By contrast, three or four line cities have more elderly people. When shopping centers such as Wanda Plaza and the Mixc sink to the three or four tier cities, they usually focus on "life".

"In many three or four line cities, shopping centers are regarded as" second living rooms "of residents. Ouyang Jie said that this requires the shopping center to enrich the catering industry. But due to the low rent of the catering contribution, the shopping center also needs to increase the proportion of the retail industry. The proportion of catering, entertainment and retailing should be maintained at around 30%. It will attract people's popularity by dining, ensure the basic flow of people by entertainment, and raise the rent of the whole project through retail.

Besides, Three or four line city Family often takes children as the core, shopping centers also have great demand for children's formats. However, because the population base is not big enough, it is necessary to control the size of children's formats and avoid excessive proportion.

It is worth noting that clothing is a highly valued format in the second tier cities, with gross margins higher than restaurants, but many clothing brands are not popular in the three or four tier cities. For this reason, Wanda tried to upgrade the clothing brand in only a few central cities, and in most three or four line cities, the brand of fashion was the main force of parity and fashion. Wanda needs to introduce more high margin formats beyond clothing, which is clearly a big challenge.