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Source: Times Finance Author: Chen Zexuan

What was once a symbol of corporate development has now become a target for bargain hunting.

Recently, three offices (hereinafter referred to as the "Xiangsheng Real Estate Project") owned by Xiangsheng Real Estate Group Co., Ltd. (hereinafter referred to as "Xiangsheng Real Estate") located in the Ruijing International Business Center in Qianjiang New City, a prosperous area in Hangzhou, were successfully sold through the judicial auction platform. The total construction area was 1,035.61 square meters and the transaction price was 30.3927 million yuan.

Before launching the dual headquarters in Hangzhou and Shanghai in 2019, Xiangsheng Real Estate's headquarters and offices of several subsidiaries were located in Ruijing International Business Center. In 2018 and 2019, Xiangsheng Real Estate's sales were 102.92 billion yuan and 115.93 billion yuan respectively, making it one of the real estate companies with sales of over 100 billion yuan.

The auction item is located on the 27th floor of Ruijing International Business Center. According to Tianyancha, this address is the registered address of several wholly-owned subsidiaries of Xiangsheng Real Estate, including Xiangsheng Real Estate Hangzhou Branch and Zhejiang Branch.

A Hangzhou office leasing agent told Times Finance that Xiangsheng Real Estate had previously used the entire floor as an office, and after Xiangsheng Real Estate moved out, the relevant property was re-rented. The three offices being auctioned are part of the property on the 27th floor, which has been vacated, but the Xiangsheng logo on the background wall of the company's front desk has not been removed, and there are still a few office furniture or items left on the site.

It is not uncommon for real estate companies to have no interest in their assets at auction, but the first auction of Xiangsheng Real Estate's office project attracted 81 rounds of fierce competition among 5 bidders. In the end, it was won by Jiusheng Holding Group Co., Ltd. (hereinafter referred to as "Jiusheng Holding Group"), a well-known local solid wood flooring manufacturer in Zhejiang. Despite the fierce competition, the transaction price was still 4.5397 million yuan lower than the appraisal price.

Coincidentally, the Shanghai headquarters building of Sansheng Hongye also attracted multiple bidders during the recent auction. After 83 rounds of bidding, the project was also sold at a discount. In fact, long before these two transactions, a bargain hunting campaign had already been surging in the bulk transaction market.

Real estate companies sell headquarters assets at a discount

In recent years, investors have become more cautious in their investment attitudes. However, when faced with high-quality assets with good value for money, investors are still active.

According to incomplete statistics from Times Finance, in the past year, the headquarters or well-known projects of many real estate companies have been put on the shelves. In addition to Xiangsheng Real Estate, they also include Wanda, Vanke, Xinxin, San Sheng Hongye and Fosun Group subsidiaries.

The relevant assets of Wanda, Vanke, Sansheng Hongye and Fosun Group's subsidiaries have all been successfully traded. The three real estate companies other than Fosun Group all sold their headquarters assets. Among them, Wanda sold Beijing Wanda Plaza, where Wanda's headquarters is located; Vanke sold the commercial and office land located in Shenzhen Bay Super Headquarters Base, which was originally planned to be used to build Vanke's new headquarters; Sansheng Hongye sold its headquarters building Sansheng Hongye Building located in Huangpu District, Shanghai.

The adjustment period of the real estate industry began in the second half of 2021. In order to exchange for liquidity, real estate companies have actively or passively sold assets in the past three years. Even now, this is still an important way for real estate companies to alleviate the tight capital chain.

At the end of May, Vanke transferred a commercial and office plot located in the Shenzhen Bay Super Headquarters Base to a joint bidder consisting of its major shareholder Shenzhen Metro Group and state-owned enterprise Shenzhen Baishuo Investment. The plot was won by Vanke in December 2017 for a total price of 3.137 billion yuan. After taking into account land price, construction costs and other items, the book value was 4.016 billion yuan. The current selling price is 2.235 billion yuan. Based on the book cost calculation, the transaction is expected to affect the current profit and loss by approximately -1.785 billion yuan.

Vanke said that this transaction is one of the company's resolute measures to implement its slimming and fitness package plan, which can directly bring in RMB 2.235 billion in cash inflow to the company, "helping the company to revitalize existing assets, optimize resource allocation, and enhance liquidity." The company no longer needs to bear the subsequent construction and operation investment of the project, which "will reduce the capital occupation of non-core assets and focus resources on doing a good job and strengthening the three main businesses."

Compared with Vanke, Xiangsheng Real Estate's judicial auction was even more passive. Tianyancha showed that Xiangsheng Real Estate had a financial loan contract dispute with China Minsheng Bank Co., Ltd. Shaoxing Branch, with the execution target amount of about 20.2726 million yuan, and the three offices involved in this judicial auction were the collateral for the above financial loan.

List of collateral for financial loans involved in Xiangsheng Real Estate's judicial auction Image source: Alibaba Assets • Judicial

As for the real estate assets whose transaction amounts have been disclosed, most of them were sold at a discount. In these transactions, the Xiangsheng Real Estate Project and the Sansheng Hongye Project both attracted more than 80 rounds of fierce competition from multiple bidders. Even with such high enthusiasm, the transaction price was still a significant discount compared to the appraisal price.

Among them, the starting price of the Xiangsheng Real Estate project was 24.452 million yuan. After 81 rounds of bidding by 5 bidders, it was finally sold for a total price of 30.3927 million yuan, which was 87.00% of the appraisal price; and the Shanghai headquarters building sold by Sansheng Hongye, the Sansheng Hongye Building, had a starting price of nearly 728 million yuan. During the auction, it attracted 7 bidders and 83 rounds of bidding. It was finally sold for 831 million yuan, which was only 82.19% of the appraisal price.

State-owned enterprises buy up large properties

Times Finance noticed that in the 81 rounds of bidding for the Xiangsheng Real Estate project, the winning bidder, Jiusheng Holding Group, made a total of 37 bids. In the final stage of the bidding, Jiusheng Holding Group kept close to its competitors and quickly raised the price within seconds after its competitors bid, demonstrating its determination to win.

Regarding the purpose and reasons for purchasing the office property through judicial auction, Times Finance contacted Jiusheng Holding Group through various means, but no response was received as of press time.

However, it is not difficult to find from the transactions of many real estate companies' assets in the first half of the year that the relevant transactions are consistent with the characteristics of the bulk transaction market. Ruihe Think Tank pointed out in the report that under the background of macroeconomic contraction, some companies are facing liquidity crisis, and "selling assets" has become the most direct means of survival for companies. From the perspective of seller types, real estate companies are still the main sellers, and most of them are concentrated in domestic developers, accounting for 39% of the transaction amount. Selling assets to ease financial pressure is the main driving force of their transactions, which also creates an opportunity for buyers with financial strength to "buy at the bottom".

As the largest bulk transaction market in the mainland, Shanghai's transaction amount accounts for half of the total transaction amount of first-tier cities all year round. In the first half of the year, Shanghai's bulk transaction market was more active than the same period last year. According to Jones Lang LaSalle statistics, in the first half of the year, Shanghai completed a total of 50 bulk transactions, an increase of 35.1% over the same period last year. In terms of the number of transactions, the number of transactions in the second quarter totaled 27, compared with 23 in the first quarter, and the market enthusiasm has increased.

JLL pointed out that investors are waiting for the right time to allocate high-quality assets with cost-effectiveness. The agency expects large institutional investors to enter the market in the second half of the year, thereby driving the growth of overall market transaction volume.

Among the many powerful buyers, state-owned enterprises have become a force that cannot be ignored. Sun Ling, head of investment and capital markets in East China at Jones Lang LaSalle, said that domestic investors have dominated the recent bulk investment market, including private enterprises and state-owned enterprises, and their investment activities have shown obvious growth momentum and investment strength.

The recent transactions of Wanda Plaza in Beijing, where Wanda's headquarters is located, the commercial and office land of Vanke Shenzhen Bay Super Headquarters Base, and Building 1 of Xingguangyao Plaza Phase II in Putuo District, which is owned by a wholly-owned subsidiary of Yuyuan Group, a listed company of Fosun Group, were all bought by state-owned enterprises. In addition, in the first half of this year, Chengdu Jiaozi Park Financial Business District Investment and Development Co., Ltd., a state-owned enterprise in Chengdu, took over Chengdu Financial Plaza, a core landmark project of Chengdu Financial City; China Life Insurance and Swire Properties, a central enterprise, jointly took over 64.79% of the equity and related debts of Beijing Yiti Port Phase II; and the State-owned Assets Supervision and Administration Commission of Xinjiang Uygur Autonomous Region acquired Huaxu International Building, an office building located in a prime location in the central urban area of ​​Shanghai.

Many institutions have analyzed that the reason that prompted them to "take action" is that in addition to purchasing office properties for their own use at low prices, these assets are also expected to allow buyers to obtain higher returns from rising rents and asset prices when the economy improves in the future.