The property tycoon has made the strongest statement

Author | Zhou Zhiyu

Editor | Zhang Xiaoling

Ten years ago, Vanke announced that the real estate industry had entered the second half, and Vanke Property became one of the earliest businesses to be pushed to the market among its diversified operations.

In the words of Zhu Baoquan, Chairman of ONEWO, at that time, Vanke Property was also being pushed into the market, becoming the most important part of Vanke Group's new ten-year development plan.

However, at that time, Zhu Baoquan already had a grand goal for Vanke Property, aiming to achieve a managed area of 600 million square meters. At that time, its managed area was only at the level of tens of millions.

Today, that ambition has been realized, and ONEWO can stand on its own. It has transitioned from a company that only served Vanke Real Estate to a comprehensive service company with annual revenue exceeding 30 billion.

In the past decade in the property industry, Zhu Baoquan has gradually realized his initial vision for ONEWO. He is also determined to use technology to bring about a qualitative change in China's property industry in the next ten years.

Of course, urban development has now shifted from the past era of large-scale construction, the "incremental era," to the "stock era," which requires meticulous management. In this new period, it is clearly inappropriate to operate using traditional property management thinking.

Zhu Baoquan believes that through the past ten years of market practice and continuous exploration in technological research and development, ONEWO can explore a path for the future of the property industry, further transitioning from property management to asset management.

This path may not be easy and will require ONEWO to prove itself with actual performance growth and efficiency improvements. But once successful, property companies like ONEWO will open up broader imaginative space, further enhancing their business capabilities, scale, and valuation. A new chapter in the second half of real estate will thus begin.

Transformation

The decision to become independent ten years ago may have been somewhat coincidental, but there is no doubt that today's ONEWO is very different from Vanke Property ten years ago.

Zhu Baoquan recalls that before Vanke Property entered the market, it had already found its benchmark, First Service. From it, Vanke Property saw that property companies have more possibilities beyond residential properties. These possibilities are not limited to property types but also pertain to what property companies should become.

In summarizing ONEWO's evolution over the past decade, Zhu Baoquan marked a series of important milestones using the Space axis and Tech axis.

Horizontally, the Space axis represents ONEWO's continuous enrichment of its management types. Through several important acquisitions, such as Yaojiang Property, ONEWO's management scale can compete with local leading companies in some regional markets; by acquiring DTZ, ONEWO has successfully expanded its capability boundaries in commercial properties.

On December 11, ONEWO's new brand, Dantian Property, officially came to the forefront, further extending ONEWO's reach into the more specialized campus and hospital sectors.

If it were merely an expansion in space, each type would still be an independent entity and could not exert the "1+1>2" effect. ONEWO aims to create an ecosystem in terms of space Zhu Baoquan believes that the property management business, being labor-intensive, does not have nationwide economies of scale and cannot truly form efficiency between individuals.

Real efficiency comes from the scale efficiency of a "local area network," which means building a service circle that can be reached within 20-30 minutes in a city area with a radius of 3 kilometers. It is also for this reason that ONEWO proposed the Butterfly City strategy in 2021.

From the financial data perspective, the effects of the Butterfly City strategy are evident. In the first half of this year, the gross profit margin of residential property services brought about by ONEWO's Butterfly City transformation increased by 0.8 percentage points.

The technology on the vertical axis represents another aspect of ONEWO's efficiency improvement. Since 2012, ONEWO has allocated 1%-2% of its revenue each year to technology.

Over the past few years, there have been significant achievements, from the remote self-service machine "Pineapple No. 1," the access equipment management system "Black Cat No. 2," the employee scheduling system "Flying Pigeon," to the latest edge computing server "Spirit Stone." The continuous innovation in software and hardware reflects ONEWO's hope to change the deeply rooted labor-intensive nature of the property management industry.

Zhu Baoquan pointed out that traditional property management is about the ability of people to manage people. He humorously mentioned that when he first started in property management, he thought he could manage security personnel, but later realized that he could only manage the general manager, and only the security supervisor could manage the security personnel. This is also the biggest problem in the property management industry: the stronger the professional capability, the weaker the ability to do other things.

With the continuous improvement of technological capabilities, property management can also transform from managing people to managing tasks. Frontline employees are no longer limited to single roles such as customer service or security personnel, but can also try to transfer to more positions. This leads to what Zhu Baoquan describes as "employees being able to run."

Through this, ONEWO has undergone a transformation and has formed a comprehensive service company that includes residential property, commercial property, urban service asset services, and enterprise service technology services.

Evolution

Ten years have passed, and ONEWO has been completely renewed. However, the significant changes in the industry require it to continue evolving to break out of the current valuation narrative.

Over the past decade, the property management industry has rapidly undergone cyclical cleansing. From the spin-off and independent development of property companies to the hot market driven by capital, and then to the severe impact suffered by some companies in the past three years due to the real estate development business.

Property stocks are no longer the darlings of the capital market, enjoying valuation premiums.

Once, driven by stories of scale growth and business expansion, leading companies could have dynamic price-to-earnings ratios exceeding 100 times. Now, including China Resources Vientiane Life, leading companies have PE ratios around 10-17 times, with the market giving them valuations similar to basic infrastructure services. Since its listing, First Service has maintained a PE ratio above 50 times for most of the time.

This valuation difference arises because, although the growth rate of accounts receivable for Chinese property companies has significantly declined compared to the previous two years and risks are gradually being cleared, investors still harbor doubts about the impairment of accounts receivable from related parties of property companies and the pressure it brings to short-term profits. Some early property companies achieved explosive growth in scale through mergers and acquisitions, leading to issues such as goodwill impairment, declining reputation, and profit decline for some "overweight" property companies In the longer term, in the current narrative, China's property management industry has rapidly entered a stock phase following changes in the real estate market, moving away from a period of high incremental growth. Property management companies will engage in more intense competition for existing residential projects, and the management and service capabilities brought about by short-term high capital investment are difficult to sustain, which instead increases operational costs and further impacts profits.

To break this deadlock, it is essential to return to whether scale can achieve sustainable growth and whether new growth points and business breakthroughs can be found beyond traditional property management services.

Zhu Baoquan is well aware of investors' concerns.

In terms of scale growth, property management companies still have multiple paths to follow. From the global development history of all light-asset companies, mergers and acquisitions are an inevitable path for scale growth. For the property management industry, what is needed is genuine mergers and acquisitions that can deeply integrate with the acquired companies in terms of culture, IT systems, or procurement systems.

Additionally, there is a need to penetrate deeper markets and open up larger markets. On December 11, ONEWO announced the launch of a new product "Smart Choice," which, through a comprehensive sorting of service spaces and operational objects within communities, Vanke Property derived 508 service SLAs (Service Level Agreements), including 158 mandatory services and 350 optional services. Optional services can be selected in terms of items and frequency, providing a more flexible pricing space.

Zou Ming, market management partner at Vanke Property, stated that in the past, property service prices were determined through a "per capita" pricing model, which actually lacked a pricing system based on service standards. After further refining service items and frequency, Vanke Property set a "bottom line" for services, allowing owners to set a "top line" for services based on their needs, which will be a supply-side reform in the property management industry.

Zou Ming predicts that if Vanke Property's management fees can drop below 2 yuan, business opportunities will increase by 110%.

ONEWO also enhances efficiency and achieves differentiated service delivery through a combination of long-term technological investments, adopting a "human + machine + remote" approach.

ONEWO is also making deeper attempts with "Butterfly City + Community Business." This capability allows ONEWO to recover accounts receivable from Vanke Real Estate while also identifying community businesses within its capability range to transform management and operational services.

This is also a concrete manifestation of property management companies' management capabilities in the stock era, which is to enhance community asset value by transforming "community businesses at the doorstep."

Previously, ONEWO had attempted community transformations in existing residential projects in Nanjing and other locations, which not only improved property collection rates, project profit margins, and owner satisfaction but also leveraged new project market acquisition. Moving forward, "Butterfly City + Community Business" could also become an important lever for ONEWO to acquire projects.

Zhu Baoquan also stated that "assets" will be one of the key focuses for ONEWO's capability building in the next three years. Transitioning from property management to asset management, extending to the upstream and downstream business chain, and serving real estate holders.

As China aims to achieve carbon peak by 2030, companies also have higher requirements for energy management. Over the past two years, ONEWO has achieved significant results in energy management by integrating IoT technology and utilizing intelligent energy consumption management and carbon emission monitoring Zhu Baoquan stated that ONEWO will transition to energy management and aims to become a pioneer in energy conservation in the real estate sector within three years. At the same time, it will fully embrace AI to further achieve a transformation from human management to task management.

The keywords "assets, low carbon, AI" behind ONEWO's next development steps also reflect Zhu Baoquan's vision for the future of property companies. By further extending along the dimensions of space and technology, property companies are gradually shedding their past labels and becoming platforms with asset management capabilities, transforming physical spaces through technology.

Perhaps this process is long and challenging, but this magnificent turnaround undoubtedly inspires hope. The capital market can also reassess ONEWO and even Vanke, using a different valuation system to evaluate their value