Three key actions for real estate enterprises to transform to asset management From Winning the stock Era
The following is the Three key actions for real estate enterprises to transform to asset management From Winning the stock Era recommended by recordtrend.com. And this article belongs to the classification: Chinese economy, Roland Berger .
01. The era of asset management in China has gradually started, and the next decade will usher in development
With mature benchmarking experience, real estate will transform to asset management, and asset management will become a necessary option for large-scale real estate enterprises
From the experience of real estate development in mature countries, when urbanization develops to a certain stage, the volume of development business is increasingly peaking, and the overall development market scale will shrink slowly.
In the process of increasing urbanization rate, other conditions for the development of asset management business are becoming more and more mature. First, the profit margin of the development business is narrowed, and the long-term and stable profit of the asset management business has a strong attraction; Secondly, the corresponding policies such as securitization and taxation are mature, and effective financial instruments appear in the real estate asset management market; Third, the relative price of stock assets is at a historically undervalued level, and the attraction of asset trading is enhanced; Finally, leading enterprises have continuously strengthened the capacity-building of asset management, which has catalysed the activity of asset management market.
From the development law of China’s real estate industry, the development demand caused by urbanization is weakening day by day. At the same time, from the perspective of preventing risks and ensuring people’s livelihood, China’s top-level policies are also focusing on regulating the profit space and scale of real estate development.
For real estate enterprises, in order to maintain their scale and profitability, they objectively need to transform to the field of large asset management and explore new growth models. On the other hand, a large number of real estate enterprises have held more stock properties in the past years, many of which have the problem of poor operation. Considering the cash flow and profitability problems generally faced by real estate enterprises, it has become an urgent task for many real estate enterprises to improve the operation efficiency of stock assets and strengthen the liquidity of existing assets around the field of large asset management.
In recent years, the driving factors of China’s real estate asset management have become increasingly mature, paving the way for the development of asset management
Throughout the United States, Japan and Singapore, the development stage of the real estate market has changed from increment driven to increment + stock. Among them, the launch of financial instruments such as REITs, the improvement of supporting tax preferential policies and the entry of long-term funds into the market are the core factors to promote the development and maturity of real estate asset management.
The development stage of China’s real estate market has begun to enter the increment + stock stage, has the endogenous power to develop the asset management model, and the core factors driving the development of asset management are gradually mature. The pilot of public REITs has been launched, and the coverage of public REITs has been gradually liberalized; In terms of human and financial resources, the support of supporting policies such as taxation, talents and the entry of long-term funds into the market is still being promoted.
From the perspective of the liberalization and maturity of asset types, we will stick to the top-level policy guidance, give priority to the liberalization of livelihood security, infrastructure and other fields, and gradually expand to commerce, office buildings and other fields. Among them, the infrastructure REITs regulations have been clearly issued in 2020. The logistics assets and industrial parks have achieved a breakthrough in public offering REITs. It is expected that apartment and commercial REITs are expected to follow in and out of Taiwan in the future.
02. In the era of large asset management, there are many opportunities, and the competition pattern is uncertain. Domestic real estate enterprises have overtaking opportunities
There are many participants in the asset management industry, and the transformed real estate enterprises have competitive advantages and play an important role
In different market regulatory environments, participants have formed different models. The relatively loose policy environment in the United States gave birth to the real estate fund model with strong financial attributes, and also formed some diversified real estate groups; The strong leadership of the Singapore government is conducive to the maturity of the diversified real estate group model.
China’s real estate development stage and regulatory environment are similar to those in the early stage of market development in the United States and Singapore, and the regulatory guidance is more biased towards Singapore. Therefore, there will be diversified real estate groups with strong real estate attributes in the Chinese market, and there may also be a real estate fund model with strong financial attributes. Real estate enterprises are expected to occupy a place in the asset management industry through transformation by relying on their own development and operation capabilities and the supplement of asset management capabilities.
Foreign successful real estate enterprises have steadily promoted the transformation of asset management and continuously deepened the construction of operation capacity and asset management capacity
On the whole, there are three important success factors for foreign successful transformation Enterprises: first, steadily promote the transformation and development in combination with the external environment and their own situation; Secondly, it has created a strong real estate operation ability and a stable rate of return on property rental; Finally, in a longer cycle, strengthen the capacity-building of asset management and continuously enhance the financial attribute.
Taking Cade as an example, it started from the development business, and then experienced a decade of asset management capacity-building under the circumstances of legalization of public offering REITs in Singapore, relaxation of supervision and clear tax incentives. On the one hand, Cade pays attention to operation and in-depth management of self owned properties to improve asset value; On the other hand, rely on the capital market to continuously optimize the asset portfolio. Recently, through the development of business stripping and listing of asset management business, a clear business logic dominated by asset management mode has been formed to improve the overall valuation of the enterprise.
In the embryonic stage of China’s asset management, the entry of foreign capital into the bureau is accelerated, and domestic real estate enterprises need to seize the opportunity
International leading real estate asset management enterprises have relatively leading advantages in capital cost, management scale and operation capacity. In recent years, foreign-funded enterprises such as Cade, Blackstone and Bofeng are also increasing their investment layout in the domestic asset management market, accumulating more than 10 billion in core cities to acquire high-quality properties such as office buildings and shopping centers, and replicating overseas mature asset management experience, It has become an important force in China’s real estate asset management market.
From the perspective of domestic real estate enterprises, relying on the large-scale housing market, leading real estate enterprises have achieved rapid growth in scale. In the development process, some enterprises relatively pay attention to the accumulation of high-quality assets, while others have reached the forefront of the industry in the opening of the model. However, for most enterprises, they have not made comprehensive and sufficient preparations in terms of assets, operation and mode.
First, the structural scarcity of high-quality assets: for a long time in the past, the land linking logic of commercial real estate led to the structural surplus of traditional products and the scarcity of innovative products. Many real estate enterprises do not have sufficient high-quality assets.
Second, lack of operational capacity: in the past, real estate enterprises generally focused on development and sales and ignored operation management. Most business management teams still did not have strong operational capacity, and the income and profit performance of commercial assets were lower than expected. At the same time, the pre project planning and digital transformation are also obviously weak.
Third, lack of asset management capacity: for most real estate enterprises, there is a lack of development, operation and asset management institutions specially established around asset management business. On the one hand, there is no special person for industry cycle and portfolio management; On the other hand, there is no professional team responsible for the investment of large assets, and the management team will discuss it one by one only when the project opportunity type appears; In addition, there is no clear system for the specific delivery and execution level of asset M & A.
In contrast, leading enterprises in asset management have built a perfect asset management function system. Taking Cade as an example, based on the asset management business, it has established a clear professional division of labor and organizational guarantee mechanism, effectively coordinated the development, operation and capital operation sectors, established a circle mechanism at the level of reporting line, data management and major decision-making, and improved the management efficiency of both ends of asset capital.
Compared with the leading international asset management enterprises, domestic real estate enterprises still have shortcomings. However, we believe that China’s asset management market is developing continuously and has broad space in the future. A number of domestic real estate enterprises will occupy an important position in the asset management industry through all-round supplement of capacity and resources.
03. Three key measures of Chinese real estate enterprises aiming at transformation
It generally takes more than 10 years for mature enterprises in developed countries to complete the transformation to real estate asset management. It is difficult to accurately predict the outbreak time of China’s real estate asset management industry, but for real estate enterprises, they need to make efforts in strategic exploration and key capacity-building, so as to make sufficient preparations for the advent of the era of asset management.
Focus on top-level design and explore the asset management development model and track in line with their own enterprises
For most enterprises, the capabilities of asset side and capital side are not fully available. They can choose the focus direction and track according to their existing foundation and existing business formats, and establish targeted capabilities according to different tracks.
From international experience, more successful overseas leading enterprises focus on a certain business format and grow into champions in subdivided fields, and fewer enterprises can do well in all-round business formats.
Therefore, enterprises should select key formats to invest core resources in many formats such as commerce, office buildings, pension, long-term rent, hotels and so on. Compared with multi format comprehensive asset management, the focus strategy is more successful and feasible. If we take a comprehensive approach and try every track, it is easier for enterprises to fall into business difficulties due to insufficient operation capacity and improper acquisition of assets.
Build a resilient business structure, realize the separation of light and heavy, professional division of labor, and build relevant capabilities
Roland Berger believes that the disciplines of development, operation and asset management have differences in business logic, capacity requirements, policy supervision and other aspects. The more feasible way is to realize the capacity construction of professional sectors through capacity separation. Build development, asset management and operation into a professional sector with independent ability to form an agile business portfolio that can cope with rapid market fluctuations and resist risks.
At the development end, it is necessary to comprehensively improve the whole chain capacity, pay close attention to the breakthrough of key links, and ensure the lean and efficient development links; At the operation end, relying on existing assets to build operation service capacity and form a benchmark that can produce stable returns; On the premise of increasingly perfect policies, the asset management side has gradually opened up the asset management channel of raising, investment, management and return.
On the other hand, operation management capability is very important for asset management business. We need to pay attention to refinement and long-term construction, and systematically strengthen and improve the operation link. The key is to return to the track essence of subdivided business types and improve key capabilities according to the differences of business types.
For example, for businesses, under the background of declining profits in development business, businesses need to strengthen their awareness of self hematopoiesis, return to the essence of retail, change their ideas, and improve their operation level around “people, market and goods”. At the same time, we need to constantly pursue innovation in operation to realize the diversified and accurate matching of people, markets and goods.
Accelerate the disposal of inefficient and sluggish assets, optimize the debt structure and sufficient enterprise capital
During the bonus period of incremental real estate development over the past few years, real estate enterprises have been guided by scale, fenced in the country, and improved the development scale in a short time, but it also brings disadvantages. On the one hand, many commercial, office buildings, apartments, hotels and other self-owned properties have low rental rates, poor operating performance, and operating profits are difficult to cover capital costs, eroding corporate profits; On the other hand, the de commercialization of residential sales is good, but the marketable formats such as parking spaces and shops are ignored. The development cost of unsold properties is even higher than the profit of sold properties, so that the contribution of the overall net cash flow of the project is not optimistic.
Under various factors such as policy, demand and competition, the bonus period of development business is no longer, the risk is high and the profit space is small. In order to control business risks and improve profits, enterprises need to be more cautious in traditional development business, take profits as the core and do not excessively pursue scale growth. At the same time, pay more attention to the acquisition of high-quality assets, rely on stable cash flow and ensure the ability to cross the cycle.
Therefore, enterprises need to increase the disposal of inefficient assets, accelerate the return of funds, and further avoid new problem assets caused by new projects. Ensure that the enterprise has sufficient capital, can hold funds at the best time, buy undervalued high-quality assets at the low point of the cycle, and finally help the enterprise have a place in the era of large asset management.
From: Roland Berger
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