PDLP Chapter 1113: Gradual Sale
Chapter 1113: Gradual Sale
Chapter 1113: Gradual Sale Brings Surprises - Click to Unlock Now.
Mai Guangde sometimes felt that Mr. Huang seemed to know everything, more like someone who knew the plot in advance. How the future would develop and what the economic situation would be like seemed to be in his head.
The thought only flashed through his mind briefly. He had never asked it before. After following Mr. Huang for so many years, he had learned one thing: don't ask what you shouldn't ask, and just do what you should do.
Huang Xiaochuan was looking through the asset summary sheet brought by Mai Guangde, which was up to the end of January 2014.
This asset list includes a list of commercial real estate projects in 93 cities across the country, as well as a market analysis report on commercial real estate in second- and third-tier cities that Mai Guangde arranged for his subordinates to prepare over a week.
Before handing the two documents over to Huang Xiaochuan, Mai Guangde personally verified them twice to ensure that every number was correct.
After an unknown amount of time, Huang Xiaochuan finished reading the asset summary table, but he didn't even glance at the analysis report on commercial real estate in second- and third-tier cities that Mai Guangde had placed high hopes on.
"Guangde!"
Mai Guangde subconsciously sat up straight.
"Guangde, I called you here because there's something I need to tell you. Remember, when this matter is being implemented in the future, you don't need to explain too much. If anyone asks, just say it's a strategic adjustment within the group."
"Mr. Huang, please speak."
Huang Xiaochuan pointed to the list of commercial real estate projects covering 93 cities on the table: "Starting this year, we will gradually sell off all commercial real estate projects in second- and third-tier cities, but we must control the pace and complete the sale within five years. We will retain all commercial real estate in prime locations in first-tier cities, without touching a single square meter."
As Mai Guangde took notes, his brain was working at lightning speed.
As the president in charge of Guangda Real Estate Group, he has a thorough understanding of the group's operations. He knows that Guangda Real Estate currently has commercial real estate projects in second- and third-tier cities, including shopping malls and office buildings, distributed across 93 cities, with a total construction area of 8.4 million square meters. According to the current market conditions, the book value is as high as 520 billion yuan.
Most of these projects were acquired between 2002 and 2010, when land prices were relatively cheap. After years of operation, most of them have entered a mature operating period, with rental yields consistently between 8% and 10%, making them an important source of cash flow for the group.
But why make the move? Mai Guangde was a little confused, so he considered it for a moment and said, "Mr. Huang, the commercial real estate in these cities is currently doing very well. Most of them have entered a mature operational phase with stable cash flow. Wouldn't it be a pity to sell them?"
Huang Xiaochuan glanced at Mai Guangde: "I know these projects are making money, and I know that selling now is like selling the goose that lays the golden eggs. But some things can't wait until the best time to act. If you find that the timing is not right, it will be too late to do anything. Moreover, commercial real estate projects will only be taken over when they can make money."
Mai Guangde nodded to indicate that he understood, but then asked, "How is the priority determined? Which ones will be released first, and which ones later?"
Huang Xiaochuan immediately gave the answer: "Based on the city's level and the project's profitability, all real estate projects in third-tier cities will be cleared out over three years, leaving none behind. Second-tier cities will be divided into two categories: high-quality projects in provincial capitals and cities with independent planning status can be delayed for now, and negotiations can be held slowly after interested buyers emerge. There is no rush, but they must be completed before 2019. Second-tier cities that are not provincial capitals or cities with independent planning status will be cleared out within three years, just like third-tier cities."
Commercial real estate in prime locations in first-tier cities should not only not be sold, but there is also an opportunity to appropriately increase holdings.
Mai Guangde kept taking notes; his hand was starting to ache from not using a pen for so long.
Huang Xiaochuan added: "In addition, starting this year, no new land reserves should be added for residential development projects. Projects in second- and third-tier cities should be withdrawn after completion. High-quality residential land in first-tier cities and some strong provincial capitals can continue to be acquired, but profit calculations must be conservative and cannot be based on the growth rate of the past ten years."
This left Mai Guangde somewhat confused.
He understood perfectly what Mr. Huang's words meant.
Although Guangda Real Estate is known for its high-end, low-density residential properties, residential development remains the group's largest source of revenue, accounting for 57% of total revenue. If it does not acquire new land reserves, it will mean that the group's future revenue will be affected.
As a professional in the real estate market, and a high-end one at that, Mai Guangde immediately sensed something unusual.
"Mr. Huang, do you believe the real estate market will change in the future?"
Huang Xiaochuan did not immediately respond to Mai Guangde's question, but looked at him first.
"Guangde, how many years have you been with me?"
"Mr. Huang, it's been almost twenty-two years."
"Twenty-two years! That's not a short time." Huang Xiaochuan stood up, walked to the French windows, and looked out at the bay.
He then turned and said, "You know I founded a think tank, the 'Hong Kong Economic Research Institute.' This institute has been researching China's real estate economy for many years, and after years of research, they've concluded that the golden age of Chinese real estate is coming to an end. In the past few years, real estate has been the engine of this country's economic growth and a channel for ordinary people to increase their wealth. However, from an economic perspective, this model is unsustainable. The increase in housing prices has far exceeded the increase in residents' income, the leverage ratio is getting higher and higher, and the housing inventory is getting larger and larger. This has created a huge bubble, so..."
However, I don't believe the real estate market will collapse. After all, the country's economic fundamentals are still intact, urbanization will continue, and the demand for basic and upgraded housing will still exist. But perhaps the rules will change, and the real estate market will see the introduction of completed housing sales, while the current and past practices of selling off-plan properties will gradually be phased out..."
Mai Guangde listened attentively, but his pen stopped moving.
He recalled that in the second half of last year, at the group's annual strategic seminar, the head of the investment and development department gave a report suggesting that the company should increase its investment in commercial real estate in second- and third-tier cities. The reason given was that land prices in first-tier cities were too high, while there were still price gaps in second- and third-tier cities. At the time, Mai Guangde did not completely agree with the suggestion, but he did not object either. He simply arranged for someone to conduct an in-depth market survey.
Now it seems that Mr. Huang's judgment was completely opposite to the investment and development department's advice. He secretly breathed a sigh of relief, glad that he hadn't made a decision immediately.
Next, Huang Xiaochuan told Mai Guangde to hurry back and summarize his requirements, formulate relevant strategies, and most importantly, keep it a secret. Only the two of them should know about the whole plan. Mai Guangde was responsible for breaking down the whole plan and implementing it in stages and batches.
"You take charge personally, and the split plan cannot be known to too many people. In the investment expansion department, asset management department, and finance department, you should select two people you trust to form a special working group in secret. They will report directly to you. All members must sign a strict confidentiality agreement. There should be both heavy rewards and heavy penalties."