Huayuan Real Estate, an "old real estate company" in the real estate circle, is about to divest its real estate business.
On April 26, Huayuan Real Estate announced that it intends to transfer the assets and liabilities related to the real estate development business held by it to Huayuan Group, the controlling shareholder of the company, and will focus on agency construction, hotel operation, asset management and operation, property management, urban operation services and other businesses.
As early as the 80s of the 20th century, the Huayuan real estate brand has been established, and it is an out-and-out old real estate enterprise, and there was even a saying in the industry that "South Vanke, North Huayuan". However, because Huayuan Real Estate has adhered to the "small and beautiful" strategy for many years, it has passed by the last round of real estate expansion cycle, and it is still a small enterprise with a sales scale of about 10 billion.
Today, the real estate industry has undergone a major turning point, and it is imperative for developers to explore new avenues. Huayuan Real Estate said that this transaction is in line with the overall vision of Huayuan Group in the "14th Five-Year Plan" and the overall direction of accelerating the strategic layout, which is conducive to improving the company's asset quality, enhancing sustainable operation ability and profitability, and safeguarding the interests of investors.
Divestment of real estate assets and liabilities
As a veteran state-owned enterprise, Huayuan Real Estate's business and strategic reform have long attracted the attention of investors.
More than a month ago, an investor consulted on the interactive platform: "Does your company have a plan to purchase all real estate projects and enter the new quality productivity industry? As an old state-owned enterprise, does it have a reform goal?"
At that time, Huayuan Real Estate said that at present, the company is still focusing on real estate development, and at the same time, it is also actively expanding "real estate +" businesses such as urban renewal and agency construction with the help of the advantages of state-owned enterprises, helping the company to transform and upgrade, and building new core competitiveness to strengthen its risk response capabilities.
On April 26, Huayuan Real Estate disclosed a major restructuring plan at the same time as releasing its annual report, which intends to transfer the assets and liabilities related to the company's real estate development business to its controlling shareholder, Beijing Huayuan Group Co., Ltd.
Huayuan Group, the target of this transaction, was established in 1983 and is a state-owned enterprise in Xicheng District, Beijing. At present, Huayuan Group has total assets of more than 50 billion yuan, 147 subordinate enterprises and thousands of employees. In terms of industry distribution, Huayuan Real Estate, which belongs to the group, has 91 companies and 56 companies in the rest of the fields.
The announcement said that the transaction intends to use cash, does not involve the issuance of shares, is expected to constitute a major asset restructuring stipulated in the "Measures for the Administration of Major Asset Restructuring of Listed Companies", will not lead to a change in the company's controlling shareholders and actual controllers, is still in the planning stage, and the transaction plan still needs to be further demonstrated and communicated and negotiated.
Prior to the transaction, Huayuan Real Estate's main business was real estate development, sales and leasing, and through this transaction, Huayuan Real Estate will place assets and liabilities related to its real estate development business, and after the completion of the transaction, it will focus on agency construction, hotel operation, asset management and operation, property management, urban operation services and other businesses to achieve strategic transformation.
In the eyes of industry insiders, Huayuan Real Estate's overall divestment of real estate business is in line with the current situation and trend of industry development.
"As the industry gradually enters a new stage of development, the business model of 'high debt, high leverage, and high turnover' of real estate companies in the past is difficult to sustain, and from the second half of 2021, the real estate market has entered a stage of deep adjustment, and the industry has accelerated the survival of the fittest. Liu Shui, director of enterprise research at the China Index Research Institute, said that the industry environment requires real estate companies to transform into service providers.
In Liu Shui's view, as the real estate market enters the stock stage, the scale of incremental construction is limited, and the stock asset management business has more room for development. In order to build a new development model, real estate enterprises need to turn to asset-light businesses such as agency construction, property management, business management, transaction services, etc. For Huayuan Real Estate, this business strategic transformation will have a significant impact on its development.
On the one hand, Huayuan Real Estate's business is "de-duplicated and light", and the asset-heavy development business is transferred and divested to Huayuan Group, which gets rid of the burden of heavy assets, and can focus on resources and energy to develop asset-light business and transform into a service-oriented company. At the same time, in terms of finance, the divestment and transfer of heavy asset development business, and the corresponding assets and liabilities are also transferred at the same time, which can reduce the leverage ratio and debt level of Huayuan Real Estate, reduce the pressure of debt repayment and ease the pressure on liquidity.
Missed industry cycles
In the past year, Huayuan Real Estate has completed sales contracts of 6.322 billion yuan, down 6.4% year-on-year, and completed sales receipts of 7.117 billion yuan, down 16.7% year-on-year.
In terms of cities, Huayuan Real Estate has laid out the Beijing-Tianjin-Hebei region, the western region and the southern region, and the settled cities include Beijing, Xi'an, Changsha, Tianjin, Guangzhou, Chongqing, Shijiazhuang, Foshan, Yinchuan, Zhuozhou, Renqiu, etc.
In the entire real estate industry, the above-mentioned business volume is not large. In CRIC's 2023 real estate enterprise sales list, Huayuan Real Estate belongs to the top 100, ranking 162nd in sales, similar to Gree Real Estate, Changjiang Industrial, Songdu Group and other enterprises.
However, this veteran real estate company has also had its own "highlight moments". Huayuan Real Estate was founded in 1983, a joint venture with Hong Kong China Resources Group, and successfully landed on the Hong Kong Stock Exchange in 1996. Later, due to differences in business operation ideas, the two parties peacefully "broke up" in 2001, and Huayuan Real Estate successfully went public through backdoor listing in 2008 and landed on the A-share market.
"South Vanke, North Huayuan", there was once such a saying in the industry. According to public information, in 2000, Huayuan Real Estate's total assets were about 8 billion yuan, making it one of the largest real estate companies in the country at that time, and Huayuan Real Estate's sales were about 4.8 billion yuan, more than Vanke at that time, and its assets, sales and other indicators were also in the forefront of the Beijing market all year round.
However, in the follow-up development, Huayuan Real Estate missed the last round of real estate expansion cycle because it adhered to the "small and beautiful" strategy.
Yihan Think Tank once said that the controlling shareholder of Huayuan Real Estate is Huayuan Group, and Huayuan Group is a wholly-owned enterprise of Xicheng District State-owned Assets Supervision and Administration Commission, so Huayuan Real Estate has innate advantages, sitting on high-quality land resources and low interest rate financing advantages. Huayuan Real Estate, which has been developed for nearly 20 years, should not be an enterprise that only exceeded 10 billion yuan in 2018.
The reason behind this is that before 2018, Huayuan Real Estate has been advocating "small and beautiful" and following the principle of "efficiency is king", and its demand for scale is not very strong. After 2018, the company first mentioned "both scale and efficiency", but it started more than ten years late.
In recent years, the sales scale of Huayuan Real Estate has not made much breakthroughs, achieving contracted sales of 12.045 billion yuan in 2018, followed by 15.077 billion yuan in 2019, 19.139 billion yuan in 2020, 10.185 billion yuan in 2021, and 6.752 billion yuan in 2022. As of 2023, the group's sales scale is still below 10 billion.
Not only that, Huayuan Real Estate has suffered losses for three consecutive years. In 2023, the group achieved operating income of 15.986 billion yuan, a year-on-year increase of 46.34%, and a net loss attributable to shareholders of listed companies of 1.537 billion yuan. In the past 2022 and 2021, Huayuan Real Estate lost 3.812 billion yuan and 669 million yuan respectively, with a total loss of more than 6 billion yuan in three years.
As of the end of 2023, Huayuan Real Estate has total assets of 30.558 billion yuan, net assets attributable to shareholders of listed companies of 2.911 billion yuan, liabilities due within one year of non-current liabilities of 8.419 billion yuan, and monetary funds at the end of the period of 2.634 billion yuan.
Regarding the development status of the industry, Huayuan Real Estate said that in 2023, except for the "Xiaoyangchun" market at the beginning of the year, the market will continue to be sluggish throughout the year, and potential home buyers will have a heavy wait-and-see mood; residents' employment, income and expectations have not yet fully recovered, and there is still a lack of confidence in the real estate market;
In terms of policy, last year's "major changes in the relationship between supply and demand in the real estate market" set the tone for the property market, opening up space for the regulatory authorities and local governments to optimize policies, and at the same time clearly accelerating the construction of the "three major projects" and building a new model of real estate development. It is expected that the restrictive policies introduced in the overheating stage of the market in 2024 are still expected to continue to be optimized and adjusted, and the real estate market will gradually return to stability in the medium and long term.
Huayuan Real Estate said that in 2024, under the overall requirements and deployment of Huayuan Group and Xicheng District State-owned Assets Supervision and Administration Commission, it will continue to do a solid job in "ensuring the delivery of buildings, ensuring people's livelihood and ensuring stability", actively respond to the phased pressure and difficulties of the company's operation, operate steadily, and promote the development of new businesses in a planned manner on the basis of focusing on the revitalization and upgrading of the company's existing stock development business.
Regarding the above-mentioned asset restructuring, Huayuan Real Estate said that it is in line with the overall direction of Huayuan Group's "14th Five-Year Plan" period to focus on the vision of "a comprehensive service provider for a smart and beautiful life" and accelerate the strategic layout, which is conducive to improving the company's asset quality and enhancing the company's sustainable operation ability and profitability. If the transaction can be successfully completed, the company's asset-liability ratio will be reduced and the asset structure will be optimized.
(This article is from Yicai)