When the realization is carried out, the "gain and loss" of R&F heavy assets

21st Century Business Herald reporter Wu Shuying reported from Guangzhou

When some housing enterprises are mired in liquidity problems, R&F Real Estate, a "red file" housing enterprise that is looked down upon by investors, is temporarily safe, which is indeed unexpected by the market.

This may be attributed to the constraint of the "three red lines", the optimization of financial indicators is not obvious enough, it has to open the self-help mode early, and when the pessimism in the industry has not yet spread, the journey of asset transfer and realization of R&F Real Estate has begun.

Since last year, the top priority of R&F Real Estate and its management has been "selling and selling", and now there are new developments. On December 7, 2021, R&F Real Estate announced that it once again sold the remaining 30% interest in the property in Guangzhou R&F International Airport Integrated Logistics Park (hereinafter referred to as "Airport Logistics Park") for 7.3 billion yuan, and is expected to recover about 1.263 billion yuan in cash.

This is another transaction between R&F Properties after a year ago, when R&F Real Estate sold a 70% interest in the Airport Logistics Park to Blackstone, and after the completion of the transfer, it will no longer hold the interest in the project.

Despite the market's negative attitude towards it, in the current market environment, R&F Real Estate can still realize assets to save cash flow, which is also worthy of highlight news. The development model of R&F Real Estate is to attach equal importance to "development and operation", and for a long time in the past, it has been criticized for dragging down the financial statements due to the precipitation of heavy assets, but this development model, at the current critical juncture, has also given it a chance to breathe. R&F Real Estate holds a "double-edged sword" that controls its destiny.

Farewell Logistics Park

The Airport Logistics Park sold by R&F Real Estate is indeed a remarkable project.

According to public information, the Airport Logistics Park is located in jingu Industrial Park, Huadu District, Guangzhou, covering an area of 1470 acres, and the high-standard warehouses, factories and cold storages currently completed can be leased for an area of about 890,000 square meters, and the equipped sets have also been completed. The net land area of the undeveloped warehouse is about 210 acres.

Unlike other real estate companies that use related parties as transaction objects when transferring assets, the counterparty of R&F's transaction is also an experienced investment group. According to the announcement of R&F Properties, Sonic Holdings I Limited, which is a fund subsidiary of blackstone group, a world-renowned investment management company, was purchased by Sonic Holdings I Limited.

In effect, it's a continuation of a deal that started last year. On August 10, 2020, R&F Real Estate has signed a letter of intent with a related party of Blackstone Group for the transfer of 70% of the equity of Airport Logistics Park, and the final transaction was completed on January 19 this year, receiving a total of about 4.062 billion yuan in cash. After the two realizations, R&F Properties expects to repatriate cash of more than $5.3 billion.

Chen Yu, managing director of Blackstone Real Estate China, previously commented on the project, saying, "Based on the scarcity of transaction subject matter, it is generally difficult to find such a large-scale logistics project park, especially in a core city like Guangzhou." ”

A person from the investment department of a leading real estate enterprise in Guangzhou analyzed in an interview with the 21st Century Business Herald reporter that the sale of assets reflects the problem of R&F's tight funds to a certain extent. However, unlike other enterprises, the assets taken out by R&F are relatively mature, the liquidity is fast, and the cash flow is stable, so the transaction speed is relatively fast.

After the clearance of the Airport Logistics Park, R&F Real Estate has also arranged the whereabouts of this fund.

R&F Properties stated that upon completion of the transaction, the Board intends to use the net proceeds from the sale to reduce the level of liabilities and to use it as the Group's general working capital. It stressed that with the cash resources derived from the sale, it would consider various avenues that could improve its overall liquidity, including but not limited to repayment, the purchase of existing notes in the open market, or early repayment of other debts.

Success or failure weighs heavily on assets

In the real estate industry, the development model of R&F Real Estate is slightly different from the layout of its peers. R&F Real Estate is a group with real estate development as its main business, while developing in the fields of hotel development and commercial operation. If it were not for the large transaction of nearly 20 billion yuan four years ago, the balance sheet of R&F Real Estate was further deteriorated, and heavy asset projects such as hotels and commercials may become a safety cushion for R&F in the current market environment.

In 2017, Wanda and Sunac China and R&F Real Estate held a cooperation conference in Beijing, in which Sunac acquired 91% of Wanda's 13 cultural tourism projects for 43.844 billion yuan, while R&F Real Estate acquired all of Wanda's 77 city hotels for 19.906 billion yuan.

This transaction, which was considered a very "good deal" at the time, became a burden on R&F Real Estate in the future. In the past two years, the hotel sector operation of R&F Real Estate has not been effective, and its mid-year report shows that in the first half of 2021, R&F Hotel operating income was 2.63 billion yuan, up 81% year-on-year; at the same time, the hotel segment recorded a loss of 547 million yuan, still in a state of continuous loss.

From the analysis of financial indicators, the debt structure of R&F Real Estate has also been criticized by investors. According to the statistics of Shell Research Institute, in the first half of this year, the asset-liability ratio of R&F Real Estate after excluding pre-collection was 74.9%, the net debt ratio was 123.5%, and the cash short-term debt ratio was 0.55. As a result, R&F Real Estate's 2021 medium-term indicators exceeded the threshold three times and maintained the rank of "red file".

Although the burden of heavy assets casts a shadow on the development of R&F Real Estate, just like the liquidation of the Airport Logistics Park, the continuous cultivation in the field of heavy assets in the past and the continuous decline in real estate market sales, the liquidity of this part of the assets can also temporarily quench the thirst of R&F Real Estate's funds.

According to R&F Properties' mid-year report, in the first half of this year, R&F's recurring turnover from the Property Investment and Hotel Operations segment increased by 63% to RMB3.03 billion. Its net profit ( excluding revaluation ) was RMB540 million.

In addition, since many of R&F Real Estate's commercial and hotel layouts are located in first- and second-tier cities, its property companies also have places for investors to see value.

On September 20, 2021, Country Garden Services announced that it had signed an equity transfer agreement with R&F Property Service Group Co., Ltd. to acquire the property management business owned by R&F Property for a consideration of not more than RMB10 billion. R&F Property was divested from R&F Properties at the end of 2020, after which about 92.5% of the shares were held by li silian and Zhang Li, the two actual controllers of R&F Real Estate.

Following country garden's services announcement of the transaction, R&F Properties announced that the company's major shareholder Chairman Li Silian and co-chairman and president Zhang Li will provide about HK$8 billion in shareholder funds to support the group, which is expected to be completed within the next one to two months.

Although the source of the funds of Li Silian and Zhang Li is not clear, the two announcements were released before and after, which also allowed investors in R&F Real Estate to see its resilience.

A real estate analyst who did not want to be named pointed out in an interview with the 21st Century Business Herald reporter, "In terms of commercial and property, R&F's assets are still relatively high-quality. So although the money from selling the property is not a listed company, the boss of R&F is still actively self-help, and you are like others, and there may not be someone to sell it. In this way, R&F is indeed still better. ”

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