news

doauthor | real estate tall, rich and handsome

with the arrival of the typhoon in shenzhen, all primary and secondary schools and airport terminals have been suspended, and there seems to be fewer people on the streets. as a real estate professional, i also took some time to take a look at the recent industry trends.

as the semi-annual reports of major domestic real estate companies are released one after another, i am particularly impressed that when the industry's downturn will bottom out may really be an unknown. but one thing we can be sure of is that it does take a certain level of skill to cross the cycle nowadays.

recently, several friends from hong kong-funded real estate companies talked about new world real estate, and a sudden piece of news was quite unexpected. hong kong media reported a few days ago that new world real estate seemed to be selling its first shopping mall, k11 art mall, located in the core area of ​​tsim sha tsui, hong kong.

it is indeed shocking to hear this news. you know, this is the pioneering work of new world in creating an art shopping center. its influence is completely comparable to the shenzhen luohu mixc developed by china resources land. its pioneering contribution to the entire commercial real estate is unquestionable.

what is even more coincidental is that the acquirer is actually china resources longdi, a subsidiary of china resources. china resources group is a large state-owned enterprise headquartered in hong kong, and its subsidiary china resources land is the only leading real estate developer in china that can compete with the hong kong-funded commercial real estate corps.

the author also checked the relevant information. the predecessor of china resources land was china resources property. its core business has always been the operation of office buildings and hotel management. it was just renamed china resources land in 2023, and its business has always been mainly concentrated in hong kong.

today, china resources group seems to have higher requirements for this platform, and the china resources business community seems to have considerable ambitions for the hong kong business circle. the acquisition of new world hong kong's top project is actually to lay the foundation for the listing of its reits.

according to reports from hong kong media in recent days, the estimated acquisition valuation price is hk$9 billion, which shows that its sincerity is still very sufficient. the final amount currently still needs to wait for the final official announcement from both parties.

new world development is one of the four major hong kong-funded real estate developers today and one of the earliest hong kong-funded real estate developers to invest heavily in the mainland. the art shopping center k11 art mall it created has been very popular among consumers since it landed in shanghai in 2013.

in 2008, adrian cheng founded k11 in hong kong, integrating art into business, giving consumers in the mall the feeling of visiting an art museum. not only did this allow the physical store to withstand the challenges of e-commerce, but the artistic temperament of the property also increased the rent of the office buildings owned by the family.

in recent years, zheng zhigang has copied the k11 model to the mainland, and it has grown very rapidly. from the emergence of k11 in hong kong in 2009 to the layout of more than 10 major central cities in the mainland by 2023, zheng zhigang can be said to have a special affection for mainland china.

in contrast, many hong kong-funded real estate developers have somewhat abandoned the mainland market. unlike new world real estate, it has directly moved its real estate headquarters to guangzhou and gradually penetrated the entire domestic high-end commercial market by deeply deploying the greater bay area market.

while running k11, zheng zhigang also used words to describe k11's lifestyle, convey ideas, and output values ​​on his official account. he has written hundreds of articles and has millions of fans. these articles have enabled him to establish an emotional connection with many k11 consumers, and each article has made readers yearn for k11.

when it comes to running k11, an anomaly in commercial real estate, i have great respect for mr. zheng. his personal artistic style is perfectly combined with the characteristics of his project. k11 has also quickly opened up in the mainland and received considerable attention.

however, judging from the current domestic real estate investment environment, it is indeed not very optimistic. for a large asset investment like new world, its debt will definitely be a bit tight. this asset sale may also be for the purpose of reducing debt.

in september last year, new world released its 2023 fiscal year results. at that time, new world’s total market value was hk$38.051 billion. in one year, new world’s total market value on september 4 was hk$16.63 billion, a drop of more than hk$20 billion.

looking at the other three major hong kong-funded real estate developers, the total market value of cheung kong group, henderson land development and sun hung kai properties are hk$107.1 billion, hk$112.8 billion and hk$213.7 billion respectively. new world development is indeed lagging behind quite seriously.

on august 30, new world development (hk00017, share price hk$6.63, market value hk$16.685 billion) released its performance forecast. new world development's overall profit performance was disturbed by impairment, and it is expected that the annual profit in fiscal year 2024 may fall by 18%~23% to hk$6.5 billion~6.9 billion.

in recent years, new world's loan amount has increased significantly, with net debt increasing significantly from hk$76.9 billion in mid-2017 to hk$130.8 billion in mid-2023.

on the other hand, while new world is "bottom fishing" in the mainland, its debt ratio is "rising steadily", and it is urgent to reduce its debt ratio. according to new world development's interim report for fiscal year 2024, its net debt ratio was 49.9% as of the end of 2023.

therefore, it is not difficult to understand why new world is selling its core assets in hong kong. judging from new world's official external information, the purpose of selling assets and realizing cash this time should be to better concentrate its firepower on the mainland layout.

as the successor of the zheng family, zheng zhigang's understanding of business is actually quite forward-looking. in terms of the combination of business and art, k11 can be said to be at the forefront of the industry. perhaps there will be more amazing projects entering the market in the future.

the cheng family, which started in the 1920s, now has a history of a hundred years. as one of the four largest wealthy families in hong kong, the cheng family currently owns two major divisions, new world development and chow tai fook jewellery group. the cheng family is the third richest family in hong kong with an estimated net worth of us$22.1 billion.

for zheng zhigang, who has been in charge of new world real estate for many years, it is very likely that the company will suffer losses for the first time in 2024. this is also something that needs to be paid special attention to for a hong kong-funded real estate company, and the pressure on this legendary third-generation helmsman is also enormous.

if it is true as the rumors say, that china resources land is "bottom-fishing" at this moment, and new world can also sell k11 art mall to recover assets and reduce its debt ratio, it may be a win-win situation.

overall, whether in mainland china or hong kong, the real estate industry has not yet bottomed out, and any actions of each player will attract public attention. only high-quality operations may still have business opportunities in the future.