Text/Leju Finance Jin Wenyu Fan Huiru
Affected by the supply of residential area of real estate related parties, the expansion of non-residential business formats by property enterprises is in full swing, and the era of excavating stock housing has begun.
Compared with some leading property enterprises to expand the urban service market, commercial management property enterprises German commercial production investment services (02270. HK) seems to prefer subletting.
On the evening of June 26, the company announced that Sichuan Huitong, a non-wholly-owned subsidiary, as the lessee, signed a lease property agreement with Sichuan Golden Global Commercial Management Co., Ltd. (hereinafter referred to as "Sichuan Gordon"). This is the second lease agreement signed by Deutsche Commercial Services this month.
This lease agreement, with a lease period of up to 12 years, involves a rent of about 49.9509 million yuan. In addition, the German commercial investment service provider needs to pay a deposit of 322,000 yuan to the latter.
The name of the lessor "Sichuan Gordon" is relatively unfamiliar to the industry, and the mention of his parent company, Hexin Real Estate, has a certain popularity in Chengdu. Hexin Real Estate is a local real estate company that rose to fame in 2020 for acquiring land at high prices in Chengdu.
In fact, German commercial investment services and Hexin Real Estate have long intersected. In April 2022, Zou Kang, a major shareholder of German Commercial Investment Services, participated in the "Chengdu-Chongqing Twin Cities Economic Circle Urban Development Theme Report Meeting" organized by Hexin Real Estate as the chairman of Deshang Group. It is not surprising that the two parties were able to reach a leasing cooperation this time.
It is not only the cooperation between "old friends", Hexin Real Estate also gave its own sincerity, not only gave a half-year rent-free period, but also gave a discount of nearly 90% in the first lease period.
According to the announcement, during the first lease period, that is, from June 21, 2023 to June 20, 2024, the German commercial investment service provider should pay the rent of 3.8641 million yuan to Hexin Real Estate, but considering the operation of the German commercial investment service, it provided a discount of 3.4051 million yuan to the German commercial investment service, so the German commercial investment service only needs to pay the rent of 458,990 yuan during the first lease period.
According to the announcement, the leased property is located on the first to tenth floors of the third building of Chengdu Dingsheng Times (also known as Dingsheng International), with a construction area of about 9260.7 square meters, which will be used for external office leasing by German Commercial Investment Services in the future.
It is worth noting that in the latest announcement, German Commercial Investment Services also spent 30 million yuan on the purchase of wealth management products, but this is a short-term investment and is expected to be redeemed after only 4 days of subscription.
The mystery of the profitability of the rental business
In fact, before that, on June 14, German Commercial Investment Services had just rented a property in Chengdu.
The property is located on the second and fourth floors to the 13th floor of Building 3, No. 3 Xingke Middle Road, Jinniu District, Chengdu, with a gross floor area of approximately 11,251.04 square meters.
The lease term is 11 years, and the rent is $36/square metre per month in terms of rent, and the rent increases by 5% every two years during the lease period under the tenancy agreement. The monthly rent of the Chengdu Dingsheng Times property leased by German Commercial Investment Services is about 37.46 yuan / square meter, which is not much different.
According to the statistics of Leju Finance's "Property K Line", since 2022, the company and its subsidiaries have leased 4 property projects for subleasing. In addition to the two projects mentioned above, it also includes the Chengdu shopping mall property project and the Yujing rental property project.
Behind Yujing's leasing properties, there are related party transactions. According to the announcement of German commercial property investment services, on November 4 last year, Deshang Yuanhong, Deshang Yongrun and Dehenghong, as tenants, signed Yujing lease agreements I, II and III with German merchant Gaoxin respectively.
Among them, the three companies of Deshang Yuanhong, Deshang Yongrun and Dehenghong, are indirect non-wholly-owned subsidiaries of German Commercial Investment Services, while Deshang Gaoxin is ultimately controlled by Zou Kang, non-executive director and controlling shareholder of German Commercial Investment Services, and Zou Jian, the controlling shareholder.
According to its announcement, the leases of Yujing Leasing Properties I, II and III under the Yujing Leasing Agreement will be recognized as right-of-use assets of DSIC Investment Services Group, with a total amount of about 157 million yuan.
In addition, the leased property forms part of the development of the "Deshang Yujing Tianjiao" real estate project by Deshang Real Estate, and the director of Deshang Property Investment Services also said that the lease project is a good opportunity to develop the group's commercial operation services and broaden its revenue stream.
In order to increase the revenue stream, German Commercial Investment Services has increased the receivables.
According to the annual report data, the prepayment, deposit and other receivables of the spot part of the German commercial investment service in 2022 increased from 13.6 million yuan in 2021 to 30.074 million yuan in 2022, an increase of 121.13%, of which 3.768 million was made for impairment in 2022.
One of the reasons is related party receivables due to the Group's long-term lease agreements providing sublease services, which involve refundable deposits and security deposits.
In addition, as of December 31, 2021 and 2022, the lease liabilities incurred by DSIC Investment Services as the lessee were RMB122,000 and RMB0 respectively.
The income of German commercial investment services was not reflected in previous financial reports, but only from the perspective of non-residential property property management service revenue, the proportion of this income showed a downward trend.
In 2021, the proportion of revenue from non-residential property management services was 61.7%, and in 2022, the proportion of revenue dropped to 51.6%.
There is an imbalance between scale and profit growth
In addition to renting properties for subleasing, DSIC also has one residential property for sale but not leased and eight commercial properties.
In 2022, the investment property increased by 112.8% from 1.33 million yuan in the previous year to 2.83 million yuan, mainly due to the acquisition of seven commercial properties in China.
In addition to focusing on the subleasing business, in the qualifying competition of management scale, German commercial investment services have always been in the tail position of the crane among listed property enterprises. Its area under management has not exceeded 10 million square meters for two consecutive years, ranking 40th among the 42 Hong Kong-listed property enterprises that have released relevant data, ranking third from the bottom.
In fact, in terms of the growth rate of scale, German commercial investment services in 2022 are not low. As of the end of 2022, it managed 57 properties with a GFA under management of 8,216,700 square meters, an increase of 68.8% compared to 4,867,800 square meters in 2021.
However, the higher scale growth rate did not bring it the same proportion of profit growth. In 2022, the revenue of German commercial investment services will be about 267 million yuan, a year-on-year increase of 5.5%, and the net profit will be about 33.596 million yuan, a slight increase of 0.47% year-on-year. Its gross profit margin declined, from 40.83% in 2021 to 35.42% in 2022.
Leju Finance's "Property K-Line" noted that at the beginning of the submission of the statement, German Commercial Investment Services also had a clear plan for mergers and acquisitions, and it is estimated that the net proceeds from the fundraising will be about HK$151 million, or about 60%, or HK$90.8 million, which will be used for strategic investment and acquisition. It plans to grow through the acquisition of an independent third-party property management company. However, with the cooling of the M&A market for property enterprises, since 2021, German Commercial Investment Services has not made efforts in M&A.
It is worth mentioning that in October last year, German Commercial Investment Services issued a related party transaction announcement, intending to purchase 320 parking spaces from a related party Deshang Real Estate through its indirect wholly-owned subsidiary, Chengdu Deshang, for a consideration of 15.6 million yuan. The acquisition of parking spaces from related parties, German Commercial Investment Services said in the announcement that it will be allocated by internal resources.
As of December 31, 2022, the closing cash of German Commercial Investment Services was 248 million yuan, a year-on-year decrease of 1.13%. During the same period, its contract liabilities were 32.418 million yuan, less than 200 million yuan and ranked third from the bottom among Hong Kong-listed property enterprises.