1.06 billion yuan to buy Yuzhou property services, China Resources Vientiane Life launched the first shot of acquisition in the year

(Text/Xie Hongjuan Editor/Yo Ma) The trend of property mergers and acquisitions continues.

On the evening of January 5, Yuzhou Group issued an announcement that it intends to transfer all the issued share capital of Yuzhou Property Services under the company, and the transfer consideration is not higher than RMB1.06 billion.

Before and after the foot, China Resources Vientiane Life issued an announcement that its wholly-owned subsidiary Runyao Property Technology Service Co., Ltd. and Tianjin Yujia, a wholly-owned subsidiary of Yuzhou Group, formally signed a strategic framework agreement to acquire 100% of the shares of Yuzhou Property Services under Yuzhou Group for 1.06 billion yuan.

It is worth mentioning that Yuzhou Group has two property sectors, namely Xiamen Yuzhou Commercial, which is mainly based on commercial operation services, and Yuzhou Property Service, which is mainly based on residential service management.

In this regard, Yuzhou Group said that the sale of the assets will be conducive to Yuzhou's goal of reducing liabilities and leverage, and optimizing the existing debt structure; secondly, Yuzhou will exert its professional advantages and focus on the commercial sector to enhance market influence and brand reputation.

Yujia Life Services has been IPO for the second time

Before the sale of Yuzhou Property Services, Yujia Life Services had twice broken into the Hong Kong Stock Exchange.

On 11 December 2020, Yuzhou Group packed two property sectors into Yujia Life Service Group and handed over its first prospectus to the Hong Kong Stock Exchange.

However, Yujia Life Service did not catch up with the good times. According to the data of Yihan Think Tank, in the whole year of 2020, 18 property companies submitted prospectuses to the Hong Kong Stock Exchange, which was basically the same as the number of listed property companies that passed the hearing, and most of them landed on the capital market one month after passing the hearing. However, at the end of 2020, the wind direction of the capital market began to change, and the listing market of property companies was cold.

According to data from the Jiahe Home Service Research Institute, a total of 36 companies went to Hong Kong to submit their forms in 2021, and as of December 30, 22 companies had invalided their IPOs, including Yujia Life Services, which submitted a prospectus at the end of 2020.

Less than three working days after the prospectus failed, Yujia Life Service opened the "second palace". According to the prospectus, as of December 31, 2020, Yujia Life Services owned 177 residential and commercial properties with a total land bank of about 23.1 million square meters.

However, Yujia Life Services, as a medium-sized property company, has not yet knocked on the door of the Hong Kong Stock Exchange. According to the Hong Kong Stock Exchange, the prospectus documents submitted by Yujia Life Services on December 16, 2021 have become invalid, which means that Yujia Life Services' impact on the IPO has once again failed.

After the second failure of the second table delivery, Yujia Life Service did not choose to hit the Hong Kong Stock Exchange again, but sold its Yuzhou property service to China Resources Vientiane Life, leaving Xiamen Yuzhou Commercial, which mainly operates commercial services.

According to the agreement, after THE FIRST CONSIDERATION (INCLUDING SINCERITY MONEY) OF NOT LESS THAN 67% OF THE CONSIDERATION PAID BY CR VIVII LIFE IS DEPOSITED INTO THE ESC ACCOUNT, THE PARTIES SHALL DELIVER THE DELIVERY IN ACCORDANCE WITH THE FRAMEWORK AGREEMENT, AND THE REMAINING CONSIDERATION SHALL BE PAID ACCORDING TO THE ACTUAL DELIVERY SCHEDULE OF THE AREA UNDER MANAGEMENT.

In other words, if the acquisition goes well, Yuzhou Group will receive no less than $710 million in working capital during the year.

"After the sale of the property, Yuzhou will reallocate financial resources to other businesses for the future development of the company." Yuzhou said that Yuzhou did not terminate the listing plan of the spin-off Yujia, in view of the failure of a number of real estate industry and property industry company prospectuses in the second half of this year, the overall decline in the valuation of property stocks, at this stage of listing is also difficult to reflect the investment value of medium-sized property management companies, Yuzhou is also actively adjusting the listing plan and strategy, will pay more attention to the operation and management of commercial assets.

Up to now, Yuzhou Commercial has a total of about 1.52 million square meters of commercial real estate projects in Shanghai, Shenzhen, Xiamen, Hefei, Nanjing and other places, including 28 projects in the operating period and 11 projects in the preparatory period.

CR Vientiane lives only 18th in terms of tube area

"Yuzhou Property Services has an area under management of about 17.6 million square meters, which is almost the sum of the new area under management of China Resources Vientiane Living Residences every year." Yu Xiaoyu, research director of Yihan Think Tank, said that the acquisition of Yuzhou property services can indeed drive the growth of the living management area of China Resources Vientiane.

In fact, the scale of CR Vientiane life is not prominent in the industry, as of June 30, 2021, CR Vientiane living residential area under management is 127 million square meters. During the same period, Country Garden's service area under management was 5 times that of it, about 645 million square meters; at the end of 2020, the area under management of Wanwuyun was more than 4 times that of it, about 566 million square meters.

"Calculated by the area under management, CR Vientiane Life ranks 13th among listed companies and 18th among the top 100 enterprises." Yu Xiaoyu said.

However, due to the fact that it is backed by the big tree of China Resources Land, the property under management is relatively high-quality, and the experience in the commercial operation sector is rich, CR Vientiane Life not only has the reputation of "a brother in commercial management", but also breaks the law of scale in the capital market, and the market value is only suppressed by the first-scale Country Garden service.

In order to rank among the first echelon of the industry, the management said at the performance conference of CR Vientiane Life at the beginning of 2021, "By the end of 2025, the property management scale of CR Vientiane Life will reach more than 400 million square meters, and it will be large-scale to increase the expansion of third parties, and maintain the commercial operation service business in the first position in the industry." ”

In other words, if CR Vientiane Life wants to add 400 million square meters of property management in five years, it must add 80 million square meters of area under management every year.

It is worth mentioning that the scale of life in China Resources Vientiane is not only not prominent, but also its annual new area under management is not ideal. According to the data, from 2018 to 2020, the area under management of CR Vientiane living residential properties was 0.78 billion square meters, 0.92 billion square meters and 107 million square meters respectively, and the residential area under management increased by 15 million square meters and 14 million square meters respectively in the latter two years.

Even if shopping malls, office buildings and other formats are added together, in the whole of 2020, CR Vientiane Life will only add 18 million square meters of area under management. In order to achieve the expected goal, the new scale of life in CR Vientiane needs to increase by 444.44% at the level of 2020.

Property companies ushered in a tide of mergers and acquisitions

"The expansion of CR Vientiane's life scale is less than expected, mainly related to its high dependence on CHINA RESOURCES Land." Industry insiders told the observer network that China Resources Land has many high-end projects, in the same echelon of housing enterprises, the transaction unit price is high, the area is small, and the China Resources Vientiane life that relies on its blood transfusion can serve the area under management is naturally better than that of the property companies under the same echelon housing enterprises.

The data shows that in 2020, the area under management of CR Vientiane Life from the related party China Resources Land accounted for 76%. As of mid-2021, 86.833 million square meters of CR Vientiane's living area came from China Resources Land, accounting for 71%.

Conventional expansion means are not as expected, and CR Vientiane Life has put its mind on mergers and acquisitions, and thus launched the "first shot" of mergers and acquisitions in the property industry in 2022.

According to the data, as of December 31, 2020, Yuzhou Property Services provided property management services for 127 projects, with a total GFA under management of about 17.6 million square meters. As at the same date, Yuzhou Property Services has booked about 177 projects to provide property management services, with a total contracted gross floor area of about 26.6 million square meters.

In this regard, CR Vientiane Life also said that the acquisition target is to have a number of property management projects in Fujian Province, Anhui Province and Zhejiang Province of China, and this acquisition is conducive to the company's strategy of broadening the scope and scale of property management services and generating synergies in the business.

As early as October 2021, CR Vientiane Life intended to make efforts in mergers and acquisitions. At that time, there were media reports that JLL was considering selling its property management business in China, excluding its real estate brokerage and appraisal business in China, for a consideration of US$500 million. Judging from the results at that time, cr vientiane life was temporarily ahead.

"In order to go further away from the goal of the first echelon of the industry, the corresponding mergers and acquisitions of China Resources Vientiane Life will increase during the year." Industry insiders admit that the concentration of the property management industry is constantly increasing, and mergers and acquisitions are not uncommon.

Taking 2021 as an example alone, according to the incomplete statistics of The Jiahe Jiaye Property Service Research Institute, a total of 86 mergers and acquisitions occurred in 33 property companies in 2021, of which 62 cases of explicit disclosure of funds and acquisition information by enterprises, costing a total of 34.72 billion yuan.

Zhang Bo, president of the branch of the 58 Housing Research Institute, said that the increase in the concentration of the property management industry can enhance the market share of the head property management enterprises on the one hand, and simultaneously affect their valuation or performance in the capital market, and the other party will form a certain competitive advantage and enhance long-term competitiveness. With the improvement of industry concentration, the head enterprises in the property management market will continue to be clarified.

This article is an exclusive manuscript of the Observer Network and may not be reproduced without authorization.