The articles in this edition were written by reporter Chen Xuebocai
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Recently, the community of Democratic Village, Xiejiawan Street, Jiulongpo District, Chongqing City, has entered people's field of vision because of the success of the renovation of its old community. The Democracy Village community is an old community, and the renovation project was launched in early 2022 and included in the relevant national pilot projects. In recent years, the renovation of old residential areas has become a key point of urban renewal, and it is also a livelihood project closely related to people's lives.
There are huge old communities in China, which often occupy the core area in the city, but most of them can no longer meet the needs of modern life due to the lack of elevators, lack of parking lots, aging lines and pipelines. In addition to hardware, there is no systematic management of the old community all year round, resulting in many potential safety hazards and inconveniences in health, fire protection, and residents' travel. In this way, the transformation of old communities has become a necessary way for urban development and improving the quality of living for residents. However, unlike the construction of new houses, the renovation of old residential areas often faces many problems such as insufficient available space, limited funding sources, and inconsistent opinions of the renovation objects.
Founded in 2018, Vision Group is one of the few companies participating in urban renewal as private capital. Beijing Jinsong Community, the first old community project renovated by Vision Group, has become one of the most classic cases of social capital participating in the renovation of old communities. The start-up capital of Vision Group came from the realization of personal assets of Zuo Hui, the founder of Lianjia, before his death.
After the Jinsong project, Vision Group has also implemented renovation projects in many cities across the country, such as Shenzhen, Chongqing, Jining, Shiyan, and Wuxi, and has also explored transformation models corresponding to different regions. The renovation projects of old residential areas in Chongqing Hongyupo Area and Xiamen Dongdu Area participated by Vision Group have also been well received by local residents recently. After 6 years of operation, what lessons can be learned from the sustainable operation of the renovation of the old community? How active is the market to participate in urban renewal now? The reporter of "China Business Daily" interviewed Tao Hongbing, chairman of Vision Mingde (Beijing) Holding Group Co., Ltd. (hereinafter referred to as "Vision Group").
"I'm the biggest product manager in the company"
China Business News: The Jinsong project has now become a template case in the field of urban renewal. However, the basic conditions of different cities and even different communities are very different, and the specific transformation implementation process is also very different. So, what is the biggest significance of the Jinsong project?
Tao Hongbing: I think one of the biggest values of the Jinsong project is the Jinsong model, which is the model of social capital entering the field of comprehensive renovation and renovation of old communities. It turns out that the renovation of old communities faces many policy bottlenecks, policy obstacles or policy gaps. In recent years, the state has issued a lot of policies, and many of these policies are some solutions and policies proposed to solve the problems faced by social capital in this field after Jinsong's research, so I think this is its biggest contribution.
At the same time, the Jinsong model also proves that if the operation is supported by the government, and the residents also agree, if these parties are linked, it can still operate in a closed loop, although the profit is very thin, the time is very long, and it will take up to 20 years of operation to have some basic and reasonable benefits, but this does not mean that other cities and other projects can also be copied, because the specific situation is different.
China Business News: Before the vision, your management experience was basically in the field of first-hand house sales, but the vision is to do urban renewal, and the difference between your work experience before and after is quite big. What is your previous work experience that can be used in the renovation of the old community?
Tao Hongbing: In fact, the essence is the same, although our original job is called sales, but it is actually the integration of planning, consulting, positioning, sales and execution. I think the core is not the execution, but the planning, positioning, product design, etc. in front. In fact, they are all about serving customers, and the needs of customers should be considered.
Now everything is changing, and it is still necessary to consider the needs of customers and residents, but it has changed from selling houses to selling services. There are two services in the old community: one is the house and the other is the people. I'm familiar with the house thing, and I'm a professional in this area.
Both are essentially service industries, and it should be said that the span is not so large. And this is also an innovative thing in China, and I can't find more experienced people to learn and learn from, so I broke out by myself.
China Business Daily: Urban renewal work has high requirements for details, how do you demand from yourself and your employees? Judging from the transformation case of the vision, there are many details that have no precedent, which will pose a great challenge for the designer. Do you have any good experience when hiring designers?
Tao Hongbing: I have always paid special attention to details, and I have paid special attention to the needs of customers and the details of products. The renovation plans of many of our projects, some very subtle requirements, are seen and put forward by me on site.
Some benchmark projects, I will go to the site to see. When I was little, I could ask employees one or twenty questions, and when I was more, I could ask hundreds of things to be rectified, so they didn't like them very much when I went to the site, thinking that I was picking too many thorns.
There are very few designers for the renovation of old communities in the society, and we are looking for professional designers, who will look for them from the perspective of operation and customers, and then combine the requirements of our cost control to put forward requirements for them. In fact, I am the product manager with the biggest vision, starting from the Jinsong project, I have personally designed and transformed the plan, and discussed it with you.
When faced with a new project, we have to go through it carefully at the beginning, and then with the accumulation of experience, we can probably judge what needs to be renovated in a community and what may be problematic. Then use the drone to take aerial photos, and you can have a preliminary judgment. When the plan is basically approved by the government and the detailed design is done, we will do the survey, so as to save a lot of the cost of preliminary demonstration and improve the efficiency a lot.
Challenges remain
China Business Daily: The vision has been in operation for 5 years. Looking back at the urban renewal business now, what are the gains and losses of your operating model? What lessons can be learned?
Tao Hongbing: The business model of the renovation and operation of the old community itself is established. We have tried many different types of projects, for example, our sources of income are property fees, parking fees, and some balanced resources given to me by the government to do operations and increase operating income. Then we provide some value-added services to the residents, and we can also get some income. Together, these incomes can make small profits, and we have verified them in many projects.
But the reality is that only a small percentage of projects are profitable, and most projects are not. In fact, we don't need to look for new sources of income, the above is enough, it can theoretically achieve small profits and sustainability, but in reality it cannot be realized. For example, it is difficult to charge property fees and parking fees, and people are not willing to pay them at present, and we can't force them.
If most projects are not profitable, it will be difficult to sustain them in terms of business model. We had thought that it would be difficult, but we thought that as long as we did good things for the people, we could also share the problems of the government, and increase the government's service function for the residents, then it should be welcomed by all parties.
The reality is that this has been done, and all parties think it's good, but there are very few people who are currently paying. Some places will give us some balanced resources, some of which are in place, and some of which are promised but cannot be given, because many resources are in the hands of various relevant departments, and it is difficult to coordinate. If you don't get balanced resources for one or two years, you can't generate operating income, and you will lose money in the next two years.
China Business News: You used to say "do the hard but right thing", but now looking back at this sentence, has anything changed?
Tao Hongbing: Now "correct" is definitely correct, and "difficult" is even more difficult than originally thought.
For example, when making parking spaces in old communities, it is difficult to charge. Some people think that if you park in your own community, you shouldn't pay the fee. In addition, when increasing parking spaces in old communities, it will involve issues such as the green belt is under the management of the garden bureau and the road is under the management of the traffic bureau, and it is difficult to coordinate between multiple departments.
We mentioned before that some parking spaces and three-dimensional parking lots can be built on public roads and public green spaces for the people, and then those parking spaces in the community that affect fire protection and traffic can be vacated and turned into landscaping. The green area has been increased over there, and some public green area has been occupied as a parking lot, but the fire protection and evacuation problems in the community have been solved. Actually, this is a good thing, but because there are several departments involved, it is difficult to do.
When the people finally evaluated our work, some of them were very satisfied and said that they had done a very good job; Some say that doing it is better than not doing it anyway; It is very rare to think that it is better not to come than not to come. But when it comes time to pay, it's the other way around: the majority of people are unwilling to pay.
No consideration was given to the return in this matter
China Business News: Vision Group does urban renewal business, and Zuo Hui has given great support. Did he imagine what kind of scale the urban renewal business would reach in the future? Has Vision Group considered investments in other areas?
Tao Hongbing: Mr. Zuo is very supportive of this matter, but Mr. Zuo has never imagined that this matter will have any brilliant returns or achievements. He said that we should do it, which can help many ordinary people and help the government, which is welcomed by all parties. If we can do it without losing money, it would be better if we could have a little return to make it sustainable. But I don't think Mr. Zuo ever expected much return on doing this.
The characteristics of this business determine that the payback period of the business is as long as 20 years, at least 15 years. Mr. Zuo knew about this when he was alive, but he still gave us more than 90% of his cash to do this, not at all for the return of economic interests, he felt that this was a return to the society.
He said that I only have so much money on hand anyway, and I will give it to you. He knew his body and his condition, and he knew that he would not live to see his investment recouped. And he is also mentally prepared, there is a high probability that this money should be donated to contribute to the society.
We have no investment in other areas other than the renovation of old communities. First, we don't have the ability to make other investments, a lot of money is in this project, all in the business, as long as we have money, we will definitely do this thing well and continue to increase investment; Second, why did we do this in the first place if we could make a quick buck doing something else? Why do we want to spend 6 or 7 billion yuan of our own funds on this matter, plus bank loans, we have invested a total of 120 billion yuan in this matter. Therefore, whether it is from our motivation or from the actual situation we have now, we will not invest in other areas.
China Business Daily: In recent years, there have been many policies for urban renewal, and there are also great calls for the renovation of old communities. If someone who came after you learned from you, what advice would you give?
Tao Hongbing: To be honest, the policy is more and more, and the support for this aspect is also increasing, but there are still very few companies like us that comprehensively renovate and operate old communities, and we don't see more enthusiasm in the market. The problem at the beginning was that the cycle was too long and the profit margin was too thin. The vast majority of enterprises still do some quasi-real estate development in the name of urban renewal, or quasi-real estate development, and there are very few that really do urban renewal based on operation. It is because the operation cycle is too long, there are many uncertainties in the middle, the risk is relatively large for enterprises, and the benefits are very thin, so there are still very few companies that really cut into this field.
There are many companies, institutions and people from all walks of life who come to us for study and research, and we have received many visiting groups, and the Jinsong project has received more than 1,000 visiting groups in more than 4 years. Almost every day several groups came and we all told them unreservedly how we did it. Originally, I thought that if others learned, we would have competitors, but later I found that others were not willing to do it after learning, so there were no competitors. It took courage to do this work from the beginning, and it takes even more courage to stick to it now.
If you have someone who wants to do this, come and talk to us. We can share our experience without reservation, so that they can lose less and save some costs. At the very least, the lessons and experiences we have gained can contribute to society and avoid duplication and waste.
Boss cheats
1. What is the greatest significance of the Jinsong project?
One of the biggest values of the Jinsong project is that it has produced the Jinsong model, which is the model for social capital to enter the field of comprehensive renovation and renovation of old communities. It turns out that the renovation of old communities faces many policy bottlenecks, policy obstacles or policy gaps. In recent years, the state has issued a lot of policies, and many of these policies are some solutions and policies proposed to solve the problems faced by social capital in this field after Jinsong's research, so I think this is its biggest contribution.
At the same time, the Jinsong model also proves that if the operation is supported by the government and the residents agree, it can still operate in a closed loop if these parties are linked. Although the profit margin is very thin and the time is very long, and it will take up to 20 years of operation to have some basic and reasonable income, this does not mean that other cities and other projects can also be copied, because the specific situation is different.
2. If it is difficult to collect property fees and parking fees, what can the urban renewal field rely on to ensure sustainable operation?
In the end, it will turn to the operation and services of the community itself, so that residents will voluntarily pay for the operation and services. Residents don't think he's paying for the property, but for the services, just like the cost of a community group buy.
Therefore, the future property company may have both basic property services and some value-added property services, and the value-added part may be the part paid by residents. The property fee of a few cents is waived, and residents have to pay extra if they need to repair it. However, the maintenance fee charged by the property will be cheaper than other suppliers in the market, and the response is fast, so residents are willing to find the property for repairs.
Judging from past cases, if the local government can really give balanced resources, the community will be larger, so we will have more resources and operating space. In addition, the concept of the government also needs to change, the company is not here to make a lot of money through this matter, we are actually helping the government, taking on some functions that the government should have undertaken. Therefore, the government should continue to invest the money that was previously spent on old communities through the purchase of services.
For example, the government was responsible for garbage removal and landscaping. Now that the property management company has undertaken these tasks, the government should still pay for this part of the cost in the form of purchasing services, as long as it does not exceed the original amount.
Some street communities have turned the money they originally spent here into buying services, and buying cleaning and greening services from property companies. Now when the property company is doing community cleaning, it also does the greening work by the way, and at the same time can get this part of the government's expenses. While expenses may not fully cover costs, they are at least a supplement to income.
We've explored some new ways and means, but it's not convenient to talk about them because they involve some of the core of our business models. When we have a certain case and extension, we can summarize it.
resume
Tao Hongbing
From 2005 to 2011, he worked for Sieyuan Brokerage, which was the leading enterprise in the field of first-hand home sales agency at that time, Tao Hongbing became president, and in 2010 he led Sieyuan Brokerage to be listed on the New York Stock Exchange. In 2012, Tao Hongbing, Li Xiaofeng and Li Guoping co-founded Gaoce Brokerage and served as the chairman of Gaoce Brokerage, which was once known as a dark horse in the field of new housing comprehensive services. In 2015, after the merger of Lianjia with Gaoce, he joined Lianjia as Senior Vice President of Lianjia and General Manager of Lianjia's New Housing Division. In 2018, with the support of Zuo Hui, Tao Hongbing founded Vision Mingde (Beijing) Holding Group Co., Ltd. and served as the chairman, and began to officially set foot in the field of urban renewal.
depth
The renovation of old residential areas requires the concerted efforts of the whole society
At the beginning of business development, the "feelings" of the vision team are stronger. Many of them invest in projects that they know will inevitably lose money, but they can't bear to see residents living in poor living conditions.
The renovation of old residential areas is actually a work that requires both pioneering spirit and special attention to specific details. There was a story that during the research stage of a project's renovation plan, the designer of the vision deliberately chose to enter the community on a pouring night, which puzzled many people. It turned out that the designer was to record in detail the leakage, drainage, and water accumulation in the community when it rained, so as to adopt the corresponding renovation design, which was also praised by the local government leaders.
In China and even in the world, the renovation of old communities is a very new topic. In the face of the housing and community structure designed decades ago, how to make it meet the new social needs after being used for decades is an important aspect that needs to be gradually explored from community facilities to macro policies, which is a test for the project team.
However, in addition to reinforced concrete, the greater resistance to the renovation of old communities comes from the intertwined contradictions such as the living habits, thinking concepts, interest appeals and blind spots of relevant policies in old communities. At the same time, there is a lack of comprehensive policies and mechanisms for the comprehensive renovation of old communities, which makes it almost difficult for social capital to participate in the transformation of old communities.
The reporter has visited the renovation of the old community of Jinsong, the renovation of the old community of Zhenwu Temple, and the rental housing of Yinghai in which Vision participated. After the comprehensive renovation of outdated and idle resources, the quality of life of local residents has improved significantly. For some, these transformations have completely changed the way they live and work. However, the payback cycle of more than 20 years severely limits the further expansion of these retrofit projects. In the reporter's view, there is a great demand for the renovation of the old community, and there is also social capital interested in it, but the implementation process of the renovation requires the joint participation of the government, enterprises and residents, to break the problems left over from history and the challenges of sustainable operation, and to give full play to the value of the stock of buildings for a greater and longer time.