China Resources Land aims to become the "King of Large Asset Management"

Author | Cao Anxun

Editor | Zhou Zhiyu

In the era of existing real estate, how to revitalize assets and maximize value has become the way for real estate companies to seek new development models. China Resources Land is particularly focusing on this.

At the performance conference on March 26th, the management of China Resources Land revealed their ambition to become the "king of large asset management". They set a goal that in the next 3-5 years, the annual issuance scale of REITs by China Resources Land is expected to reach around 10 billion RMB, and in the next 5 years, they hope to reach an issuance scale of over 50 billion RMB.

For the nascent domestic REITs market, a scale of 50 billion RMB is a huge number. If the goal is achieved, it may become a major milestone in the asset management process of real estate companies.

Chairman of the Board of China Resources Land, Li Xin, stated at the performance conference that they will take the "large asset management" business as the main business focus and actively promote the company's transformation towards large asset management business. The goal is to nurture the large asset management business as the second growth curve during the 14th Five-Year Plan period.

Specifically, China Resources Land will not only continue to promote the growth of asset management scale, but also strengthen asset securitization operations and promote the expansion of public offering REITs.

The pace of China Resources Land's REITs has already been at the forefront among major real estate companies.

Huaxia China Resources Commercial REIT is one of the largest raised among the first batch of listed public offering REITs for consumer infrastructure, raising a total of 6.902 billion RMB.

This not only demonstrates the high yield expectations brought by the well-operated underlying assets of Qingdao MixC, but also shows China Resources Land's leading position in commercial real estate and even asset management.

As a leading commercial real estate developer that created the MixC IP, China Resources Land has strong asset management capabilities. As of December 2023, China Resources Land's asset management scale reached 427.46 billion RMB, a year-on-year increase of 19.2%, with shopping centers accounting for 63.3%.

In 2023, China Resources Land's shopping centers achieved a turnover of 17.85 billion RMB, a year-on-year increase of 29.7%. Its 76 operating shopping centers achieved a retail turnover of 163.87 billion RMB, a year-on-year increase of 44.2%.

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

Prior to this, by the end of 2022, Huaxia Fund China Resources Youchao REIT had already been listed and has been performing steadily. In 2023, the revenue of Huaxia Fund China Resources Youchao REIT was 78.4107 million RMB, achieving a distribution rate of 5.03% in 2023.

Against the backdrop of a weak recovery in development business and generally declining gross profit margins, the performance of the large asset management business has become crucial to China Resources Land's current and future profitability.

In 2023, China Resources Land achieved a revenue of 251.14 billion RMB, a year-on-year increase of 21.3%; the net profit attributable to equity holders was 31.37 billion RMB, a year-on-year increase of 11.7%, making it one of the few high-quality real estate companies to achieve growth in both revenue and profit However, the only downside is that in 2023, China Resources Land's comprehensive gross profit margin decreased by one percentage point to 25.2%.

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

In 2023, the revenue from the operating real estate business was 22.23 billion yuan, a year-on-year increase of 30.6%, accounting for only 8.85% of the total operating income, but contributing 28.3% to the core net profit.

In the long run, striving to be the "king of large asset management" is the necessary path for China Resources Land to seek long-term profit growth.

Today, REITs have become a trillion-dollar blue ocean market that is surging with opportunities and harbors the dawn of transformation for real estate companies.

Recently, after nearly two decades of exploration, the first batch of consumer infrastructure public REITs have been successively listed.

This means that real estate companies can now participate in public REITs ranging from industrial parks, logistics parks, affordable housing, and other areas, officially expanding to the commercial real estate sector where real estate companies have a wide layout, achieving a breakthrough in major financial support measures.

This not only can alleviate the funding pressure on real estate companies but also activates the value of real estate asset management business, providing a strong boost for real estate companies looking to transform through asset management business and operational management skills, illuminating the way forward for the real estate industry in the era of operation.

Chairman of Vanke, Yu Liang, once excitedly expressed that the importance of REITs to real estate operation business is similar to the importance of mortgage loans to residential development, which will help real estate developers transform into operators of real estate services. Its profound impact will become evident over time.

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

After three years of deep industry adjustments, the survival logic of real estate companies has changed significantly. In the future second half of the real estate industry, real estate companies also need to shift from pure developers to operators and managers of real estate. This poses higher demands on the management capabilities of real estate companies.

In the future, real estate companies may see the emergence of asset management giants like Blackstone. Real estate companies such as China Resources Land, Longfor, and Vanke, which excel in asset management capabilities, are also expected to usher in new market valuations and value reassessments after weathering the storm