R&F Real Estate's "forward" Zhang Zhang resigned, and the pattern of "dual boss system" changed

The only "dual boss system" in the real estate industry will become a thing of the past, and Zhang Li, one of the co-founders of R&F Properties, officially resigned from the company.

On December 29, R&F (02777. HK) announced that due to the need to invest more time and energy in other matters, Zhang Zhang has resigned as the company's director and chief executive officer since December 29, 2023.

R&F said that as the company's co-founder, Zhang Li has played an important role in managing the company for nearly 30 years and has laid an important foundation for the group. "The Board would like to express its sincere gratitude to Mr. Zhang for his valuable contributions to the Company during his tenure as an Executive Director and the Chief Executive Officer of the Company. ”

Zhang Li, who was born in 1953, is now in his prime. Before joining the real estate industry, he worked as a worker and civil servant, went to sea to do business in 1988, and officially joined the real estate industry in 1993. Since then, with the vigorous development of the real estate industry, Zhang Li invited Li Silian, who graduated from the Department of Mathematics of Hong Kong Chinese University, to join and jointly invest 20 million yuan to form Guangzhou Tianli Real Estate Group Co., Ltd., with both parties accounting for 50% of the shares. This is also the predecessor of R&F Properties.

In the nearly 30 years since then, R&F has had highs and downturns, and its operation has been up and down, but the bond between Zhang Zhang and Li Silian does not seem to have been affected, and it has maintained a "dual boss system" so far, and its shareholding ratio in R&F has also remained roughly the same, at 27.77% and 28.97% respectively.

Regarding the relationship between the two, Zhang Zhang once said to the public, "My partner (referring to Li Silian) and I have not blushed for ten years, and we are unique in the business world." We haven't signed a single written word between us, and we're all talking about credit. Li Silian also said, "We have been very happy to cooperate, and all kinds of affairs of the company are jointly participated in." It's just that Mr. Zhang usually plays the striker, responsible for engineering development and management, while I am the guard, in charge of cash and sales. ”

With a clear division of labor, Li Silian is in charge of corporate finance and marketing, while Zhang Li is responsible for project land and project management, leading R&F from a small company of more than 10 people to today.

By demolishing the Guangzhou Jiabang Chemical Plant and developing it into a new residential building for R&F, R&F earned its first pot of gold in the real estate industry. Since then, through the old reform model of "demolishing old factories and building new houses", R&F has been out of control, and has successively turned copper factories, chemical factories, old funeral parlors, building materials factories, etc. into real estate, and has become famous in Guangzhou.

With the continuous development and growth of the company, Zhang Li went north to expand its territory, and in 2002, it spent a huge amount of 3.2 billion yuan to win a plot of land in Beijing's East Third Ring Road. It was the largest public tender project at the time, and it made R&F famous in Beijing. In 2004, the project, called Beijing R&F City, contributed more than 3 billion yuan in sales to R&F, accounting for nearly half of the group's total sales.

In early 2005, R&F sold its first office project, R&F Gemini, in Beijing, opening a new chapter in its entry into commercial real estate. In July of this year, R&F landed on the capital market and was listed in Hong Kong, and in 2006 it achieved sales of more than 10 billion yuan, and in 2007, R&F's sales were second only to Vanke, China Shipping and Greenland, ranking fourth in the industry, becoming the first of the "Five Tigers in South China".

It was also in 2007 that R&F embarked on a path of transformation towards both residential and commercial development, developing high-end office buildings, commercial projects and world-class hotels. By the end of 2013, R&F had expanded its global footprint in Malaysia, Australia, the United Kingdom, Cambodia and South Korea, and by the end of 2017, R&F Properties had expanded its global footprint to cover 69 cities and regions around the world.

R&F also stepped on the wrong pace, and when the investment was aggressive, it encountered the subprime mortgage crisis in the United States, and the real estate market was in a downturn, and the capital chain was tight. Thanks to the upward trend in the property market since then, R&F has overcome difficulties again, and finally ranked among the 100 billion real estate companies in 2020 with sales of more than 130 billion yuan.

During this period, R&F made an important transaction. In 2017, R&F acquired 73 hotel assets from Wanda for a total price of nearly 19 billion yuan, bringing the number of hotels in its hands to 89, making it the world's largest luxury hotel owner. At the signing site of this "Deal of the Century", Zhang Zhang and Li Silian attended together.

But this deal, which was considered to be "picking up a bargain", became a drag on R&F in the future. Some industry insiders who are more familiar with R&F once told reporters that these hotels were not very profitable at that time, and if the handover and other procedures were smooth, it was estimated that it would be in mid-2018, and in 2020, when the asset situation was just about to be straightened out, it encountered the epidemic again.

During this period, the hotel business continued to lose money. From 2017 to 2022, R&F's loss from hotel operations continued to rise from nearly 150 million yuan to more than 2.3 billion yuan, and as of the first half of 2023, the loss of this business has narrowed, but it still exceeds 800 million yuan.

In addition to the operational drag, in 2017, when the above-mentioned hotel asset portfolio was acquired, R&F's total interest-bearing liabilities increased from 120.852 billion yuan in 2016 to 142.243 billion yuan, and increased by more than 20 billion yuan and 30 billion yuan in 2018 and 2019, respectively.

Under the huge debt pressure, R&F also began to change its pace early and promote the work of debt reduction. At the end of 2019, when the net debt ratio reached 199%, R&F said that it would suspend land acquisition, and after the "three red lines" in the second half of 2020, the sale of assets has become an important measure frequently mentioned by R&F, and assets such as Guangzhou Airport Logistics Park and property sector have been put on the shelves.

None of these efforts have spared R&F from its liquidity woes. In December 2021, R&F disclosed that a US$725 million bond was about to mature and launched a buyback offer to seek an extension of the debt, and in March 2022, R&F's onshore debt also became unrepayable when it matured. In November 2022, R&F became the first real estate company to successfully roll over all of its onshore and offshore bonds, with a total debt rollover of approximately RMB46.6 billion.

While R&F was taking a turn for the better at the business level, Zhang Li was in trouble abroad. At the end of November 2022, Zhang was arrested by police in London, England, and faces extradition proceedings on charges of offering bribes to U.S. government officials. Since then, Zhang Lili has paid a bail of up to 128 million yuan, and in mid-June 2023, he agreed to be extradited to the United States.

In mid-July, the U.S. Attorney's Office for the Northern District of California disclosed a press release showing that Zhang had reached an agreement with prosecutors to extend the prosecution. If Zhang complies with the terms of the deferred prosecution agreement, the charges will be dropped after three years.

According to local media reports in San Francisco, the agreement requires Zhang Zhang to admit bribery and other misconduct and pay a fine of $50,000. On July 20, R&F insiders confirmed to Yicai that Zhang Zhang had returned to China by plane, and on the 31st of that month, Zhang Zhang attended the opening ceremony of Guangzhou R&F Hospital, which was also his first public appearance after returning to China.

In fact, before standing on the platform for R&F Hospital, the last time Zhang Li appeared in the public eye was on November 29, 2022, when he attended a relevant meeting of the China Real Estate Chamber of Commerce online. It is reported that from 2012 to 2022, Zhang Li served as the chairman of the third and fourth councils of the All-China Real Estate Chamber of Commerce, and was co-opted as the honorary president of the chamber at the meeting on November 29. Recently, a person close to the All-China Real Estate Chamber of Commerce revealed to reporters that he had recently seen Zhang Zhang and wanted to participate in the annual meeting of the Chamber of Commerce, and his mental state was particularly good.

Some industry insiders once pointed out that the "dual boss system" actually gave R&F more certainty in the face of the founder turmoil, and Li Silian still presided over the overall situation of the company. R&F also made it clear in the company's announcement that the incident "will not have any material adverse impact on the company's business and operations". Now, R&F has won a respite at the business level, and there is only one "Gemini" left in the real estate industry.