Since 2009, Gemdale Group and UBS jointly established the first standardized dollar fund of real estate in China, and successfully raised and invested more than 200 million US dollars. In more than ten years, WINS Investment has grown into an institution of real estate investment with a certain influence in the industry. The main business growth of WINS Investment, as a professional institution of real estate investment under Gemdale Group,comes from the diversified investment business centering around equity investment in real estate projects. In addition, we have also made a series of innovative explorations in the emerging stock market.
What is special about WINS Investment, as an investment institution focusing on the real estate sector? What are your judgments and expectations for 2020? Recently, Xu Yafeng, President of WINS Investment, accepted an exclusive interview by Real Estate Asset Management Network.
1. Compared with the past, what changes occurred to the market of real estate finance in 2019?
Xu Yafeng:In short, it was "cooling down."
In the past 20 years, the real estate industry has been in a state of rapid growth, and companies have relatively high expectations of the market. In the context of the government's emphasis on deleveraging, the industry began to adjust itself in 2018. In 2019, both the financing of financial institutions and the acquisition of land by real estate companies became more rational. 2019 was a year of mildness and rationality. When we have experienced it, you will find out that under the new situation, we need to take a more rational attitude and have more professional ability to pay attention to and judge the market.
2. What kind of vision does WINS Investment want to create in the market of real estate finance?
Xu Yafeng:Since Gemdale Group and UBS jointly established the first USD fund, and successfully raised and invested more than 200 million US dollars,in the past ten years, as a strategic carrier of independent operation of Gemdale Group's real estate investment business, WINS Investment has developed vigorously the diversified investment business with equity investment in residential development projects as the core, and has maintained close cooperation with banks, securities, trusts, insurance, asset management companies, etc., and has also brought very good returns to investors.
At present, WINS Investment focuses on the development of several types of business. One is the "investment + agent construction" business carried out in collaboration with Gemdale Management. As a professional institution of real estate investment under Gemdale Group, WINS Investment can form a very good resonance, synergy and integration with Gemdale Management. Specifically, WINS Investment has relevant capabilities and experience to select high-quality investment targets in the market and cooperates with Gemdale resources to provide value-added services such as agent construction for investment targets, achieving mutual benefit and win-win results for all parties.
The other type is core value-added funds. We focus on acquiring core commercial properties with value-added space. Through the transformation and upgrading of properties, the improvement of service, and the upgrading of building use efficiency, we can realize value mining and addition of properties.
In the future, our most ideal state is to create a model of "PE+REITs" two-wheel drive.First, in the early development stage of the project, we can invest a certain scale of equity funds in the project through private equity funds in a legal and statutory way, and then carry out acquisition, transformation, value addition and operation to the project. Secondly, in the project holding phase, after a relatively stable cash flow of assets has come into being, we can realize exit in the capital market through asset securitization, and open up the public offering market if the policy permits, and turn it into a product with stable income that the public can purchase.
3. When talking about more representative projects, you will think of Bridge 8. What is special about this project?
Xu Yafeng:The project of Shanghai No. 8 Bridge is quite representative. The asset-light projects have achieved securitization, which represents a direction for urban renewal.
Bridge 8 can be regarded as a relatively well-known asset in Shanghai. At that time, with the cooperation of the team of operation and management, WINS Investment conducted a comprehensive analysis and calculation of the cash flow and solvency of the project, and determined the project’s pooled assets, and also conducted repeated research on transaction structure, product structure, issuance scale, etc. and explored out innovative solutions. Through asset securitization, a new development model was constructed for the project of Shanghai No. 8 Bridge. The stock market is an open ecology, in which WINS plays the role of an accelerator, linking business cooperation in various professional fields, revitalizing stock assets and forming a sustainable development model.
Many characteristics of the product of No.8 Bridge ABS have laid a good foundation and market influence for the development of WINS Investment in the field of the financial innovation of real estate.
The first is innovation. The "No. 8 Bridge ABS" is the first "asset-light" asset securitization product in the domestic history of ABS in cultural and creative parks. Through effective cash flow demonstration, it has realized the unsecured product model of rational financing scale of "asset-light" products;
The second is high efficiency. The underlying assets are the rental income of the project in the future. Relying on the support of Gemdale Group, through effective demonstration of cash flow and asset management-driven future income enhancement capabilities, we can obtain healthy, statutory and effective leverage, and form an efficient investment model for the products of "asset-light" cultural and creative parks;
The third is high quality.The project is an old city renovation project in the core area ofa first-tier city. It is the earliest and landmark cluster of creative industries in Shanghai. Based on years of operation, it has formed a strong competitive advantage with stable income and still with room for growth andimprovement. It is a classic case of realizing urban renewal and value growth through the operation and management of excellent assets.
("Harvest Gemdale No. 8 Bridge Asset-backed Special Plan", referred to as "No. 8 Bridge ABS", is China's first "asset-light" asset securitization product of cultural and creative industry park jointly initiated and established by WINS Investment as the transaction consultant and general coordinator and its strategic partner Harvest Capital, having opened up a model of financial innovation operation for the "asset-light" operation of cultural and creative park projects. Shanghai No. 8 Bridge Project is located in the Xintiandi business circle in Luwan District, Shanghai, covering an area of approximately 19,303 square meters. It is the first cluster of creative industries in Shanghai. It was originally located at the former Shanghai Automobile Brake Factory, SMPIC Machinery Factory, White Elephant Battery Factory, and Yarn-dyed Weaving No. 3 Factory. From 2003, with the support of Shanghai Municipal Government, Shanghai Economic Commission, and Luwan District People’s Government, Kicers Group successively implemented reconstruction, renovation, investment promotion and operation management of the old factory buildings, turning the old factory buildings with unique historical and cultural connotations into a new carrier for attracting creative talents, stimulating creative inspiration, and gathering creative industries. In 2015, Gemdale Properties & Investment completed the equity acquisition of Shanghai No. 8 Bridge Project and cooperated with Kicers Group in the form of strategic joint venture for a series of products. “Shanghai No. 8 Bridge Project” effectively improved the urban appearance of the region and supported the upgrading and transformation of traditional enterprises. has created new taxation and employment growth points for the local area, and achieved a balance between corporate and social benefits.)
4. In addition to the residential development business, what other types of business does WINS Investment pay attention to?
Xu Yafeng: We pay attention to core commercial properties with value-added space. Currently, there are mainly three types of assets for our attention:
The first category: industrial parks. In 2019, we were paying attention to a new project of asset-light industrial office located in the core area of Shanghai near No. 8 Bridge. The project was originally a supermarket, but this traditional format is not suitable for the current market demand. WINS plans to invest in the project jointly with Gemdale Properties & Investment, lease the original assets as a whole, and employ Kicers V-Seen, the original management team of No. 8 Bridge under Gemdale Properties & Investment to transform, upgrade, operate and manage the project, creating a new office format with cultural creativity as the engine and with scientific and technological service as the theme to cater to the needs of market customers. In addition, we have recently paid attention to some industrial park projects in China's first-tier, strong first-tier and key second-tier cities, including Hangzhou, which are entirely based on industrial park investment.
The second category: community-based business. For example, Shanghai Kangjian Plaza project completed in 2019, with a construction area of more than 20,000 square meters, is a community-based business project. This project is located in Xuhui District, the CBD of Shanghai. It enjoys a high-quality base of regional consumption and educational resources, surrounded by schools, and has great demand potential and value enhancement space in education and entertainment. We hope to build Kangjian Plaza into a community-based shopping mall with the service theme of children's education, leisure and entertainment through renovation and upgrading and resource integration. Such a community-based business with demand potential and value enhancement space is also a business format that we focus on. In the future, we will make it into an asset package and create greater value through capital operation and asset management.
The third category: comprehensive properties that integrate office, apartment, commercial supporting facilities and other functional formats
We are interested in projects of these categories.
5. In these business-format investments, how does WINS Investment play the role of asset management?
Xu Yafeng: Investment in these holding value-added formats requires a relatively long investment cycle, so we need first to cooperate with long-term capital. Moreover, the fund cycle of international institutional investors for holding value-added assets is usually an 8+2 year strategy, so we also hope to move closer to this international strategy of fund investment management. Now when we view such projects, we usually consider the return on investment in 5, 7 or even 10 years.
In a longer investment cycle, first, we can have enough time to maximize the added value of assets. Second, we can give full play to the capital operation and asset management capabilities of fund managers, and choose an optimal strategy and time point for the exit of the project in the normal business cycle.Cooperation with long-term capital can maximize the value created for investors.
In addition, while continuously strengthening our own asset management and operation capabilities, we will also actively promote the real estate finance strategy of "PE+REITs" two-wheel drive, matching investors with attributes of corresponding return and risk control requirements at different stages of project investment and operation to promote a wider range of investors to participate in the investment of holding projects while managing and operating projects for a long time, forming a sustainable win-win cooperation model with investors.
6. What measures will WINS Investment choose to usher in the market in 2020?
Xu Yafeng:In 2019, in the context of continuous deleveraging, the real estate market was indeed affected a lot, but for investment institutions, we also found out some opportunities therein through professional investment vision and operational capabilities, so we successfully achieved our business goals through the joint efforts of our team in 2019.
I don’t think there will be any major changes in 2020 in the government’s attitude towards deleveraging. Therefore, in the new year, we will still have to look at the market more rationally. In addition, we will be more determined to cultivate our own investment and business capabilities and find more and better investment projects in the market by improving our own capabilities. In 2020, we will not passively wait for the market to change, but take the initiative to usher in the new year's market through the improvement of our own investment and operational capabilities. Compared with 2019, we also hope that in the new year, WINS Investment can achieve a healthy and stable growth with a relatively high growth rate, and can implement more projects in new business.
