Vantone Real Estate Successfully Transforms Into Investment Firm
Founded in Hainan in the early 1990s, Vantone is one of the symbols of the birth of China's real estate industry in the market-oriented country. But if you still think of it as a real estate company, you're a bit behind the curve.
Vantone looks like a lot of companies, but it's certainly not a real estate company -- it manages five funds under its umbrella, with an asset-management scale of 3.6 billion yuan; it's talking to more than 10 companies of the size of TCL and Huiyuan about cooperating with it in an attempt to invest in and operate the industrial properties of those companies; it's been planning for a long time for an industrial real estate fund that will be released as China's first RMB industrial real estate fund; it's planning for a long time to launch a new industrial real estate fund, and it's the first such fund in China. Renminbi industrial real estate fund; it holds the industrial property area will now increase from the existing more than 400,000 square meters to more than 1 million square meters ...... This is no longer a traditional real estate developer's behavior, and its business form is being transformed by the manufacturing industry to the financial industry. "The profit model has changed, Vantone is now an investment company." Zheng Yi, deputy general manager of Vantone Holdings, simply told reporters this.
Zheng Yi is leading a team of more than 30 people who act in standard private equity style. They raise money from a clientele of trusts, private banks and third-party financial institutions like Noah's Wealth, and use the funds to develop and cultivate holding properties such as industrial real estate. In addition to financing and investing, fund management and exits are also on their to-do list.
But China's industrial real estate is still in the cultivation stage right now. Zheng Yi feels that at this stage, investors value asset appreciation more than rental income, so a better way to launch a fund would be to list it on the stock market or through the REITs (Real Estate Investment Trusts) model. Vantone has found the object of learning. In the business model of industrial real estate, it learns from CapitaMalls Asia's PE + REITs model (private equity + REITs); and in the professional management of industrial properties, its standard is GLP, and some of Vantone's employees come from the largest industrial and logistics infrastructure service provider in Asia. merchant.
Feng Lun and Pan Shiyi, who started out with the company, are now the godfathers of the real estate industry, and when the six founders of Vantone get together, they are known collectively as the "Vantone Six". A book titled "The Future Through Thorns and Thorns***" details their entrepreneurial story. But in fact, these six people did not **** to the future, but began their own business, Vantone only left the leading brother Feng Lun. The transformation of Vantone can start from Feng Lun's abdication in 2011.
On March 30, 2011, Xu Li, the former general manager of Vantone Real Estate, succeeded Feng Lun as chairman of the board of this real estate company with a history of 20 years, and began to let the company develop in the direction of investment companies. Feng Lun's position changed from developer to chairman of Vantone Holdings, a finance company.
A-share-listed Vantone Real Estate became a subsidiary of Vantone Holdings, which holds a 51 percent stake in it. "In 1993, the concept of commercial housing has just begun, and now has faced the transformation of the industry, the competition has changed, the competition in the real estate industry is mainly the scale of the previous competition, everyone circled the land, to see who circled the big, but now it has become a competition for the 'craft', because the whole market is progressing, the consumer demand is becoming increasingly diversification." Feng Lun said.
But he and his team still saw an opportunity.
In 2008, Vantone started to cooperate with TCL, a consumer electronics company, which invested 55% and 45% of the capital to set up Vantone New Creation, renovating the original factory buildings, warehouses and dormitories of TCL's Wuxi factory, and leasing 60% of the area back to TCL. Vantone New Creation also re-invested in Sony, Midea, and Sobeda Logistics, and increased its occupancy rate from 60% to ?95% within a year. The occupancy rate was raised from 60% to 95% within a year.
Here, multinationals and local Chinese companies put their logos on their own warehouses, making it one of the most internationalized places in China's third-tier cities. After just one year, Aptar Works-Wuxi realized an 8 percent net operating yield. Following this model, early last year, Vantone began another partnership with fruit and vegetable beverage company Huiyuan.
Zhengyi feels that industrial real estate is a value niche, and that few developers keen to make a quick profit from residential development have had the patience to discover its value, and that the opportunity is there for the taking.
In a survey conducted by Hu Xiaorui, director of CBRE's Beijing Industrial and Logistics Services Department, a real estate consulting firm, the return on investment in logistics and warehousing in first-tier cities has reached 11 percent, while second-tier cities can also reach 7 to 8 percent. If the government gives policy incentives, the return on investment will be higher than 15%. The rental level of logistics warehouses in Beijing has risen from 0.8 yuan per square meter per day in 2009 to 1 yuan to 1.2 yuan per square meter.
Because logistics warehousing covers a large area and generates little tax revenue, local governments have no incentive to plan land for logistics warehousing unless companies with high turnover are willing to put their clearing centers or registrations in the area to contribute to tax revenue. "Now it's basically impossible to get land for logistics warehousing in first-tier cities, no matter what kind of company." Hu Xiaorui said. It found that in Beijing alone, the supply gap of industrial land is at least 1 million square meters. Logistics and warehousing rents are rising and demand exceeds supply, so e-commerce companies such as Jingdong and Vancl, which are supposed to operate with light assets, have no choice but to finance land and build their own warehouses.
It's not easy to get land, and Vantone Holdings has chosen to acquire established industrial properties from other companies, as it did with TCL. Zheng Yi's list of partners already includes more than 10 companies in talks, most of which are in the manufacturing sector, and some e-commerce companies are in communication.
Those manufacturing companies that are already listed need to make their financial reports look better. In the listed company's financial indicators, a large number of precipitation in the industrial property investment will undoubtedly drag down its return on assets and asset turnover, and in the income statement, annual asset depreciation and management and maintenance fees, are direct expenses and costs, while there is also a huge opportunity cost caused by the use of funds, the sale of industrial real estate has become an urgent matter.
Some other e-commerce companies that intend to go public have also begun to consider the needs of foreign capital markets. There, companies should focus their capital on their main business, and the asset-heavy model of sinking large amounts of capital into fixed-asset investments is unwelcome and requires a shift in thinking. "They all have a drive to cede assets at this stage." Zheng Yi said.
These two needs are what Zheng Yi sees as good opportunities right now. But while there are more and more industrial properties for Zheng Yi to choose from, few meet the investment-grade standards required for listing or REITs. An important task for Vantone at this stage is to cultivate or remodel properties with superior locations to bring them up to the standard of investment-grade properties, so as to bring higher value-added assets to these properties.
A fund management-driven investment company, Vantone, looks more like CDH Investment, founded by Wang Gongquan, one of Vantone's six gentlemen. Only how the real estate fund is going to be launched, the whole industry is still figuring out. In addition to listing, what Vantone wants more is the REITs model, which allows more investors seeking stable rental returns to participate in the mature stage of industrial real estate investment through asset securitization.
"As early as 2009, China has formed a more mature program on REITs, and the opening of the floodgates is a matter of time. From historical experience, the stage of economic slowdown is the best time to launch REITs." Zheng Yi said. He has been promoting REITs since he returned to China in 2006 and has been involved in the research, piloting, and program design of the Securities and Futures Commission's regulations on REITs.
But right now the Chinese government is curbing the overheated real estate sector, and there is still no deadline for the launch of REITs, so all Vantone can do is wait.