The Edifício España: A Global Investor Meets Local Politics

The Dalian Wanda Group Co. Ltd. (Wanda) was a fast-growing real estate imperium in China, built by Jianlin Wang, the wealthiest man in China. In 2010, Wang transformed Wanda into an entertainment conglomerate and initiated an ambitious international growth strategy. His ambitions knew few limits; however, one of his acquisitions—the Edificio España in Spain, an iconic historical building in the centre of Madrid—ran into difficulties due to conflicts with the local authorities. Wang’s refurbishment plans for Edificio España envisaged a comprehensive renovation and upgrade of the building’s commercial spaces, which required approvals from the Local Historical Heritage Commission. Initially, politicians expressed their support for Wang’s plan, but the application progressed slowly through the formal process and became entangled in local politics. A local election mid-process resulted in a new party gaining control of the city council—a governing party that was not supportive of Wang’s plans. Should Wang cut his losses and sell the building, or persist and reboot his project management?

This case illustrates political risks in host societies, and thus, the need to incorporate political and regulatory considerations in conducting due diligence, even if leading local politicians actively support the initial investment. The case also challenges students to proactively develop strategies to handle local stakeholders’ concerns that go beyond legal requirements. The case has been designed for graduate- and executive-level students in advanced international business, business and society, and real estate management classes to achieve the following learning objectives:<br><ul><li>Appreciate the complexity and importance of stakeholder relationships in host societies.</li><li>Incorporate political and social aspects in conducting due diligence.</li><li>Appreciate the specific challenges faced by Chinese multinationals operating in Western societies.</li><li>Evaluate and develop political influence and non-market strategies for stakeholder engagement.</li></ul>

• Non-market strategy , political risk , MNE to government relations, managing foreign subsidiaries, international entrepreneurship, urban development, stakeholders of the MNE, protection of cultural heritage