How does the industry "big shuffle" real estate enterprises go through the cycle?
Since the second half of 2021, the real estate market has entered the downward channel. Some highly indebted real estate enterprises have difficulty in operation, and the changes in the real estate industry pattern have intensified. According to agency statistics, in the first 11 months of this year, the number of real estate enterprises with sales exceeding 10 billion yuan (RMB, the same below) decreased by one-third; The top ten real estate enterprises in terms of sales have also undergone great changes compared with last year.
The insiders believe that the real estate industry is in the low tide stage of a round of large cycle. The "big reshuffle" and "big change" are in progress. The real estate enterprises that can control risks first and move towards a new development mode will continue to share the "dividend" of urbanization, otherwise they may be eliminated by the market.
As the object that the mainland real estate enterprises have learned and emulated, Hong Kong funded real estate enterprises that have experienced a complete real estate cycle and have been baptized by international capital may be able to provide some experience and reference in crossing the cycle and exploring new development models.
Huang Shaomei, Executive Director and Director and CEO of New World Development Co., Ltd., an old Hong Kong funded real estate enterprise, said recently in an interview with the China News Agency that in the past 50 years of development, New World Group has experienced the global financial crisis, the Hong Kong financial crisis in 1997 and many other volatile environments and the low ebb of the property market, so it has high requirements for "stability".
She believes that forward-looking layout, multiple ecosystems and high-quality development are the guarantees for enterprises to successfully cross the cycle.
Change of development management mode
Over the years, most mainland real estate enterprises have pursued scale expansion and improved turnover speed, but they have high liabilities and high operational risks; However, Hong Kong funded real estate enterprises are generally conservative in investment, slow in speed and long in project development cycle.
Huang Shaomei believes that the New World has developed a development path different from the two. After New World moved its headquarters from Hong Kong to Guangzhou last year, the company has been operating very fast in the field of on-site decision-making, project development, sales, leasing and property management, and has been on a par with local enterprises in terms of speed. The difference is that in terms of design, New World still retains the characteristics of internationalization of Hong Kong enterprises' design; In terms of operation, it still adopts the unique management mode of Hong Kong funded enterprises.
Mainland real estate enterprises also began to learn from overseas experience. Vanke takes Dahe Housing, Japan's largest residential builder, as the benchmark. Yu Liang, chairman of the board of directors of Vanke, once said that the smooth transformation of Daiwa Real Estate in the 1990s during the Great Depression of Japanese real estate development business and the era of shrinking tables gave Vanke great confidence. When experiencing the impact, Dahe Housing Construction Co., Ltd. took measures such as rapidly shrinking the balance sheet, reducing interest bearing liabilities, and increasing cash flow. In the past two years, Vanke has made similar changes, while significantly adjusting its management structure, trying to ask for dividends from management.
Income diversification
In Huang Shaomei's opinion, the enterprise's ability to pass through the cycle comes from the diversification of income. She said that New World not only sells office buildings and residences, but also self owned leases, paying equal attention to leasing and sales. In this way, the cash flow brought by sales will be recovered in the short term, and when the enterprise encounters a storm and the sales profit declines, there will be a long-term stable rent flow to make up for it.
In addition to real estate business, New World is building a diversified ecosystem, including residential, commercial, hotel, retail, education, financial insurance, medical and other fields. For example, the mall is operated by K11; In terms of hotels, there are many brands, such as Rosewood Hotel, Qianli Hotel and New World Hotel; Education sector includes Chow Tai Fook Education; Humansa Renshan Youshe is in the medical field; Chow Tai Fook in jewelry. All links in the ecosystem can promote each other, and all consumption points in the ecosystem can also be shared.
Reasonable diversified development is an important way to help enterprises reduce risks and smooth out cyclical fluctuations. Previously, real estate enterprises including Country Garden, Vanke, Longhu and Wanda also explored in this field. However, experts also remind that diversification has high requirements on the operation and management ability of enterprises, and blind diversification or too big step will lead to business crisis. This is also the reason why some mainland real estate enterprises have difficulties in operation this year.
Focus on core cities
After experiencing ups and downs, many enterprises will choose to shrink the front and refocus. The development of the New World in the mainland has also gone through this process. Since the 1980s, New World's investment footprint in the mainland has spread to dozens of cities in South China, East China, Northeast China, North China and Central China. After a round of adjustment and contraction in 2015, Huang Shaomei revealed that the New World began to focus on the Guangdong Hong Kong Macao Greater Bay Area and the Yangtze River Delta, especially the four core cities of Guangzhou, Shenzhen, Shanghai and Hangzhou.
Why choose these four cities? Huang Shaomei said that the complex projects that New World is good at have received abundant returns on investment in these four cities, and have been widely supported in these four cities. Moreover, these four cities have a good foundation for development and are suitable for building projects such as urban landmarks and high-end properties, which are also areas that New World is good at. She revealed that in recent years, New World has invested more than 200 billion yuan in mainland cities in the Greater Bay Area of Guangdong, Hong Kong and Macao. Judging from the land acquisition trend of leading real estate enterprises in the mainland, there has also been a trend of focusing on core cities since this year.
