China property developer Dalian Wanda Group receives a lot of attention. That comes when your company is run by the richest man in all of China, Wang Jianlin.
Up to now, Wanda has been able to have its way; able to buy and develop property because of its relative deep pockets to everyone else. While Wanda has a slew of hotel sin China already open or in development, outside the country it is still growing the name, with projects in some stage set of development for Australia's Gold Coast and Sydney; London; Chicago; and Los Angeles.
But one European city is now absent from its list—and reportedly because Wang couldn't seem to get along with the local government.
In summer 2014, Wanda acquired the Edificio España building in Madrid for €265 million from Spanish bank Banco Santander. The idea was to convert the building into a hotel. That's not how it panned out, however.
According to UK's Daily Mail, by January 2016, the relationship between Wanda and Madrid's local government had soured. Here's the crux, as written by Daily Mail:
"Madrid's new anti-austerity mayor Manuela Carmena has put investors on edge by vowing to sternly scrutinize big building projects approved by the former conservative council.
According to Spanish reports, city authorities are refusing to let Wanda demolish the building's facade before reconstructing it.
Citing Spanish media, the state-run Global Times newspaper, said Wanda has started dismissing employees in its Madrid office after talks with the city government failed.
"I have never been so badly treated in my life," Wang was quoted as saying by Spanish news website Periodista Digital. "I've been treated like a dog."
Wanda denied the report in a statement. "No such negotiations as mentioned by the report took place between Wanda and the Madrid government and it is impossible for Chairman Wang Jianlin to make such statements," it said. "Wanda's Edificio España building project is currently under comprehensive reassessment."
That reassessment turned out to be a move to sell the property before doing anything with it. In July, Law360 reported that Wanda was selling the building back to a Spanish company, having reached an agreement to sell to Spain-based developer Baraka Global Invest SLU for €272 million—and in the process still making a gain of, albeit only €7 million, and that doesn't take into account any money Wanda poured into the building in the almost two years it did own it.
Wanda said in a filing it had signed a memorandum of understanding with Baraka Global on July 12.
“Pursuant to the [memorandum of understanding], Baraka has paid the group €1 million as earnest money, which is refundable if the final agreement for the possible disposal is not executed by 15 October 2016, or applied as part of the purchase price if the final agreement is executed by that date,” Wanda Hotel Development said in the regulatory filing.
“The group has granted to the buyer exclusivity to conduct due diligence and negotiation of the possible disposal up to 15 October 2016. The possible disposal is still under discussion and negotiation and subject to final agreement."
The October 15 date is now 10 days past, and there still is not definitive word that a deal was executed. However, a short financial brief put out by Reuters on October 25 read:
*Update on possible disposal of property in Spain
*Possible disposal is still under discussion and negotiation by parties with intention to agree on terms of formal agreement
The expectation is that this is the deal between Wanda and Baraka.
The uneven scenario and eventual outcome is a cautionary tale for foreign investors: buying local property is only the first hurdle. How you work with local officials is the next.