Author | Anjou Cao

Editor | Zhou Zhiyu

In the era of real estate stocks, how to revitalize on-hand assets and maximize value has become a way for housing enterprises to find a new model of development. China Resources Land is betting heavily on this.

At the results conference on March 26, China Resources Land's management revealed its ambition to become the “King of Big Asset Management”. They proposed a goal. In the next 3-5 years, China Resources Land's annual REITs issuance scale is expected to reach about 10 billion yuan, and in the next 5 years, the REITs distribution scale is expected to reach 50 billion yuan or more.

For the nascent domestic REITs market, the scale of 50 billion yuan is a huge figure. If the goal is achieved, it may become a major milestone in the asset management process of housing enterprises.

Li Xin, chairman of the board of directors of China Resources Land, said at the performance meeting that the “big asset management” business will be used as the main channel business to actively promote the company's transformation into a large asset management business. The goal is to cultivate the major asset management business into the second growth curve within the 14th five period.

Specifically, in addition to continuing to increase the scale of asset management, China Resources Land will also strengthen asset securitization operations and promote the expansion of public REITs.

The pace of China Resources Land REITs is already in the first tier of major housing enterprises.

Huaxia Huarun Commercial REITs were the largest in the first batch of consumer infrastructure public REITs to be listed, raising a total of 6.902 billion yuan.

This not only shows the high earnings expectations brought about by the good operation of the underlying asset, Qingdao Vientiane City, but also shows China Resources Land's leading position in commercial real estate and even asset management.

As the commercial real estate leader that created Vientiane City IP, China Resources Land has strong asset management capabilities. As of December 2023, China Resources Land's asset management scale reached 427.46 billion yuan, an increase of 19.2% over the previous year, with shopping malls accounting for 63.3%.

In 2023, China Resources Land Shopping Center achieved a turnover of 17.85 billion yuan, an increase of 29.7% over the previous year, and its 76 active shopping malls achieved retail sales of 163.87 billion yuan, an increase of 44.2% over the previous year.

Furthermore, the occupancy rate of its office buildings increased 2.6 percentage points to 81.8%, and the hotel occupancy rate reached 63.3%.

Prior to that, at the end of 2022, Huaxia Fund China Resources Youchao REIT had already been listed. Since operation, the performance has been steady. In 2023, Huaxia Fund China Resources Youchao REIT's revenue was 784.107 million yuan, and a distribution rate of 5.03% was achieved in 2023.

Against the backdrop of a weak recovery in the development business and a general decline in gross margin, the performance of the large asset management business is already the key to influencing China Resources Land's current and future profits.

In 2023, China Resources Land achieved revenue of 251.14 billion yuan, an increase of 21.3% year on year; net profit to mother was 31.37 billion yuan, an increase of 11.7% year on year. It is one of the few high-quality real estate enterprises that achieved both revenue and profit growth.

However, what is lacking in the US and China is that China Resources Land's comprehensive gross margin dropped by 1 percentage point to 25.2% in 2023.

At this point, the gross margin of 69.6% of the operating real estate business played an important role in smoothing the profit decline.

In 2023, operating real estate business revenue was 22.23 billion yuan, up 30.6% year over year, accounting for only 8.85% of total turnover, but contributed 28.3% of core net profit.

In the long run, striving to become the “king of big asset management” is the only way for China Resources Land to seek long-term profit growth.

Today's REITs are already a trillion-dollar blue ocean market bursting with waves and harboring the dawn of transformation of housing enterprises.

Recently, after nearly 20 years of exploration, the first batch of consumer infrastructure public REITs were launched one after another.

This means that the scope of public REITs that housing enterprises can participate in has officially expanded from the fields of industrial parks, logistics parks, guaranteed housing, etc., to the commercial real estate sector with a broad layout of housing enterprises, and a breakthrough in major financial support measures has been achieved.

This not only relieves pressure on the capital chain of housing enterprises, but also activates the value of housing enterprises' asset management business, gives housing enterprises that want to transform their asset management business and operation management skills, and illuminates the future of the real estate industry in the operating era.

Yu Liang, chairman of Vanke's board of directors, was even more excited to say that the importance of REITs to real estate management business, similar to the importance of mortgage loans for housing development, will help real estate developers transform into real estate management service providers, and their profound impact will be shown over time.

Peking University's Guanghua School of Management predicts in its report that China's infrastructure stock exceeds 100 trillion dollars, and even if only 1% is securitized, it can support a trillion dollar infrastructure REITs market.

After three years of in-depth industry adjustments, the survival logic of housing enterprises has changed drastically. In the second half of the future real estate market, housing enterprises will also need to shift from being pure developers to real estate operators and operators. All of this places higher demands on the management capabilities of housing enterprises.

Among future housing enterprises, asset management giants like Kuroishi may emerge. Housing companies known for their asset management capabilities, such as China Resources Land, Longhu, and Vanke, are also expected to usher in new market capitalization and value revaluation after Liu Dianhua.