As the first year of the 14th Five-Year Plan, the year 2021 ushers in a new phase of industry policies and innovative development for real estate finance. From the rapid growth of China's real estate industry in the past 20 years to the pursuit of high-quality development today, how to build an effective path for the new development pattern has become a common topic of concern in the industry.
On August 4, the 10th BRIC Forum 2021 was held in Shanghai, guided by China Real Estate Industry Association, and hosted by BRIC Media and China Real Estate Finance (a magazine). With the theme of “New Stage, New Pattern, New Power”, this year's BRIC Forum brought together experts and scholars from various fields, industry leaders and industry elites to join the event.
Wang Huimin, Honorary Vice-President of China Real Estate Association (resident), delivered a speech for the conference. He believed that under the tone of the current regulation policy, we should adhere to the guideline of “houses are for living instead of speculation”, make good use of the inherent laws of financial capital, follow the market rules of financial capital, and “marry” finance with pan-real estate. In the future, the industry needs to focus on exploring and solving problems, including: realizing the social benefits of finance and serving the industrial requirements in such aspects as finance industrial parks, housing leasing and urban renewal, etc. Lian Ping, the chairman of China Chief Economist Forum and the chief economist and Research Institute dean of Zhixin Investment, gave a speech at the forum, saying that the overall environment is relatively tigh t at present from the perspective of the regulatory policies including “three red lines” and “risk management of loan concentration of commercial banks”. “So we need to provide structural and protective housing financial support.” First and second-tier cities with higher pressure on rising prices, need to do more at the supply level, including increasing land supply and enhancing the development capacity of housing enterprises, which requires structural, reasonable and moderate increase in financial support to structural housing. After that, a number of industry experts and industry elites, also discussed the theme of the forum, and expressed their views successively.
Mr. Xin Yong, General Manager of Strategic Investment Department of WINS Investment, was invited to attend this forum and participated in the roundtable dialogue titled “Real Estate Private Equity Investment Strategy”, sharing his views on the investment strategy under the new development stage and how to select assets and manage them well.
Core value-added investment strategy
First of all, Mr. Xin Yong stated that, as a real estate investment company with a developer shareholder' background, WINS Investment attaches great importance to diversified asset allocation. In addition to development equity investment and related enabling business, WINS Investment is also focusing on expanding investment in held properties. Regarding the choice of investment strategy, Mr. Xin emphasized the core value-added investment strategy adopted by WINS. Specifically, on the one hand, through the physical transformation and construction of the assets, the efficiency of the buildings themselves can be improved; on the other hand, in the operation of the assets, comprehensive enabling services can be provided to realize the exploration and enhancement of the asset value.
Centering around the core value-added strategy, WINS focuses on businesses with demand potential and value appreciation as the main investment strategy, with industrial parks and community business being the key investment sectors that WINS focuses on. During the sharing, Mr. Xin briefly introduced the industrial park project in the core area of Guangzhou Science City, in which WINS has recently participated. The project has a total construction area of about 150,000 square meters. Catering to the regional market development and the company's strategy, the industrial layout of the project is positioned in popular fields such as biomedicine, electronic information and artificial intelligence, which are in line with the current economic development trend. In terms of capital strategy, we also hope to make matching with REITs issuance in the future to form a benign capital operation model. Community business is also a key focus of WINS in the holding business. Xin Yong mentioned: “In the current development stage, we see the strong demand for daily consumption, culture and entertainment, interest cultivation and comprehensive services from residents around the community in the regional market segment, and we feel that this area has certain rising space and potential of value empowerment.”
Matching between the asset side and capital side
According to Xin Yong, the key focus of the fundraising, investment, management and exit of real estate funds is to seek a high degree of matching between the asset side and the capital side. For held properties, if we can achieve fine coordinated management of all links, we will gain more trust and favor from long-term equity capital in the future. “Now more and more institutional investors are willing to choose localized funds for cooperation, and there is even a trend to directly attach more importance to the quality of the assets, and make the upfront management fee income more rational, and reflect the value of the manager more reasonably in the future excess returns. This is an opportunity for companies that are gradually growing and maturing and have management expertise in a certain field. Along with the increasing maturity of the healthy development of the capital market and the increasing value capability and complementarity of investors and managers, there will be more and more room for the development of real estate funds.” Xin Yong shared at the forum.
Asset selection and asset management
In response to the moderator's question on how to invest in and manage projects well, Xin Yong shared three points. First, we should treat the market development trend with a forward-looking view and adhere to the established investment strategy and the fields in which we are proficient. Second, we should do a good job of interfacing the “two brains” – responsibility for the whole process of investment, financing, management and exit of investment projects and fine control of each link of asset management. Third, we should make good use of the support and supervision power of the capital market, and under the premise of project confidentiality, we can choose to communicate with professional institutional investors to provide more side support for the evaluation and judgment of the project, and make sufficient preparation for the fund raising and future exit strategy.
Therefore, Xin Yong hoped that REITs would have the opportunity to develop diversified products faster. He believed that “REITs itself is an independent platform of investment, financing, management and exit for original equity holders and managers. Take the mature REITs capital markets in the US, Singapore, Japan, Hong Kong and other regions for example. Their wide range of investors is the best supervision for the quality of investment projects and good operation of the platform”.
Opinions shared by guests in the same venue
Mr. Zhou Songming, Vice-President of Everbright Jiabao and Chief Operating Officer of Everbright Anshi, who participated in the roundtable dialogue at the same venue, said that along with the economic transformation and upgrading and the structural changes of the industry, both transformation and changes represent opportunities. The scales of the times are tilting towards opportunities. As fund managers, we should be more based on value investment, focus our energy on the track of long-term refined operation, identify really good assets, grow together with them, and provide diversified exit channels for the assets. Investment should begin with the end in order to comfortably traverse the cycle and realize the value embodiment.
“The arbitrage stage of real estate private equity fund has passed, and core competitiveness will be tested in the future, so only private equity funds with core competitiveness can develop for a longer period.” Gao Xiang, president of Jingrui Youyue Capital Management, said that the investment strategy of Youyue Capital Management comes from four aspects: First, Youyue Capital Management insists on developing real equity funds, and does not develop non-standard projects and non-standard debts. Second, the investment target mainly focuses on development-oriented residential projects. Third, at the fund raising end, it insists on doing business with the real equity investors who have the same or similar philosophy as or to Youyue’ s investment, most of them are institutional clients, and does not involve in fund raising at the wealth end. Fourth, Youyue Capital Management assists the development of small and medium-sized real estate enterprises, especially the real estate enterprises with financing difficulties, and the two parties shall establish funds to jointly promote the successful development of projects.
By adhering to Landsea's product characteristics and the business idea of small share operation, Cyanhill Capital focuses on assets such as park-type commercial office, long-term rental apartments and retirement apartments in the field of equity investment. Fang Xudong, deputy general manager and managing director of Fund Management Department of Landsea Cyanhill Capital, said that the real estate fund insists on equity investment and does not do leverage-driven business, “Real estate fund needs to return to its origin and earn excess return by the manager's ability, and should not do other work (debt investment).” For the industry investment opportunities, he believes that the asset prices on the current market are on the high side, investors do not require low returns, and some dumping projects, liquidation-type projects and capital chain breakage projects have certain investment opportunities.
WINS INVESTMENT
WINS Investment is a professional institution of real estate investment under Gemdale Corporation. As an important carrier of the financial flank in the “one body, two wings” strategy of Gemdale Corporation, it has maintained steady growth and industry recognition in the field of real estate finance for many years, relying on the strong platform and competitiveness of Gemdale Corporation, fully reflecting the solid strength of Gemdale Corporation's diversified layout. In recent years, WINS Investment has been committed to developing a diversified and comprehensive business system centered around equity investment in residential development projects in first- and second-tier cities and strong third-tier cities, old-city renovation funds, urban renewal funds, core value-added funds, asset securitization and other businesses. In the future, WINS Investment will continue to implement the development strategy of Gemdale Corporation – provider of comprehensive urban service and developer of new urban areas of industry-city integration, and will be committed to building itself into the most valuable international provider of real estate financial service, creating more value for investors and contributing to urban transformation and upgrading and economic development.
