Author | Zhou Zhiyu
Editor | Zhang Xiaoling
At the beginning of the new year, Vanke, which has always been low-key and cautious in personnel matters, suddenly made a bold adjustment by reassigning two key business executives. Sun Jia, the former head of the Southern Region and a veteran of Vanke, was transferred to the newly established Business Group (BG) as the Chief Partner. Zhou Yiqun, who joined Vanke from Xuhui less than three months ago, broke the norm by being &#34;parachuted&#34; into the Southern Region to replace Sun Jia as the regional head.
In the history of Vanke, it is extremely rare for a regional head to be parachuted in. In the past decade or so, only Mao Daqing was directly parachuted from the original Kaiyuan Group to Vanke to oversee the Beijing region. He was a manager with extensive connections and industry experience in Beijing, while Zhou Yiqun has little experience working in the Southern region.
Behind this seemingly sudden and rapid move is the tremendous pressure on Vanke's development and operation, which cannot be solved by conventional thinking as before. It is better to break the rules and try boldly. On the other hand, Vanke is also eager to break through in the second half of the industry's operation, quickly integrate commercial assets, and reap the benefits of REITs. Sun Jia is the talent in this area.
It can be said that this change is closely related to Vanke's future. This is also a steady and stable real estate company with a history of more than 30 years, facing the strategies to cope with the drastic changes in the industry and macroeconomics. If Vanke continues to lead in the field of REITs, it will maintain its position as the industry's comprehensive strength leader and even continue to lead in the second half.
Nothing is unchangeable. Only innovation can lead to the future.
<h2>Adjustment</h2>
After the acquisition of Yinli in 2016, Vanke has finally decided to vertically manage its commercial business after years of intermittent integration.
On January 14th, Wall Street News learned that Vanke will integrate its previously scattered seven regional commercial businesses and Yinli Group into the newly established Business Group, which will be led by Sun Jia.
In addition, Ding Liye will continue to serve as the Chairman of Yinli Group and also serve as the Chief Advisor of the Business Group. Wang Haiwu, who was &#34;parachuted&#34; into Yinli in 2021, will serve as the core partner of the Business Group.
At a time when the industry is facing challenges, Vanke has sent a &#34;capable&#34; person to make a big impact in the trillion-dollar commercial real estate REITs market. It is not surprising that Sun Jia has taken on the role of Chief Partner of the Business Group at this time.
Currently, the process of deleveraging and de-financialization in the real estate development business is still ongoing. However, operating service businesses such as commercial real estate and long-term rental apartments are supported by policies and favored by capital. REITs are expected to replace some traditional financing channels and become the key to building the capital circulation capability of real estate companies.
As Vanke's Chairman of the Board, Yu Liang, said, for real estate operating businesses, the importance of REITs is similar to that of mortgage loans to residential development, bridging the gap between investment, financing, management, and exit. It will also help Vanke transform from a real estate developer to an operating service provider of real estate.
Sun Jia has a wealth of experience in this field. Among Vanke's current seven regions, the Southern Region has the most diversified business types and the longest front line. It is also internally recognized as a region that is &#34;difficult to handle&#34;. In 2020, the Southern Region established the organizational structure of the Business Group and made many attempts in commercial projects.
In fact, when Sun Jia was in charge of Shanghai, he developed and operated multiple commercial complexes. He was also one of the front-line managers of Vanke who started exploring and practicing operational businesses early on, and he has rich experience in asset transactions and successful collaborations with multiple investment funds and state-owned enterprises.
The integration between Inly and Vanke Commercial has been ongoing for the past few years. In 2017, Vanke established two commercial real estate funds to acquire 42 commercial projects under its umbrella, which were then handed over to Inly for unified operation and management. In September 2022, Vanke also transferred several commercial projects from various districts, totaling 49, to be managed by Inly.
Compared to the integration in other regions, the integration progress between the Shanghai region, Vanke's southern region, and Inly has been slightly slower. Prior to Sun Jia's appointment, He Runfeng, the partner of Vanke's southern region and the general manager of the commercial division, had been transferred to Inly in Shanghai as the deputy general manager. Now, with Sun Jia assuming the role of chief partner of the commercial division, the integration between the two parties will further accelerate.
Internal sources at Vanke stated that Sun Jia's appointment reflects Vanke's desire to leverage the REITs (Real Estate Investment Trusts) trend to further develop its commercial business by strengthening team allocation.
According to Vanke's internal estimates, there is still room for further fundraising after the listing of the China International Capital Corporation Inly Consumer REITs. Inly already has over 40 projects that meet the requirements for REITs fundraising, which can further activate Vanke's commercial assets.
<h2>Dawn</h2>
This personnel adjustment at the beginning of the year reflects Vanke's efforts to find answers in the industry's winter.
One aspect is at the level of development business, where past successful experiences no longer apply, and internal mobility within the professional manager system cultivated by most real estate companies cannot solve the problem. It is better to introduce fresh blood and give it a try. Another aspect is the REITs transformation of holding-type properties such as commercial real estate, which is the hope for the entire second half of the game.
On October 26, 2023, the China Securities Regulatory Commission announced the first batch of public offerings of consumer infrastructure REITs in China. China Jinmao, China Resources, Vanke Inly, all got a head start. This is equivalent to opening up another financing channel for the operational projects of real estate developers, achieving a closed-loop for commercial operations. For the cash-strapped and sluggish real estate industry, it can be seen as a shot in the arm.
No one wants to miss this opportunity. Vanke, China Overseas, Poly, China Resources Land, and other real estate companies have set their sights on this track. China Resources has even set up a dedicated asset management platform company for REITs business, closely cooperating with businesses such as Wanda Life.
The success of issuing REITs also tests the project management capabilities and is the core factor that will influence the future industry hierarchy as real estate companies transition from a simple &#34;development + holding&#34; model to real estate asset management companies.
In the eyes of an institutional investor who has been tracking Vanke for a long time, the independence of the commercial division is like when Vanke Property became an independent division fifteen years ago.
In 2009, Vanke Property became independent and later developed in a market-oriented manner, expanding projects outside the Vanke system, achieving the &#34;largest IPO&#34; on the Hong Kong Stock Exchange two years ago. Now, riding the wave of REITs, Vanke Commercial, which already has one of the largest managed areas in the commercial field, must seize the opportunity of this capitalization wave.
Heading towards the second half of the real estate industry, &#34;riding the waves&#34;.
According to Vanke's earnings report, as of the end of June last year, Vanke had opened a total of 203 commercial projects with a total floor area of 11.183 million square meters. Among mainland real estate companies, its floor area is second only to Wanda. However, its commercial business revenue was only 4.37 billion yuan, which is not high compared to Longfor (with a floor area of 7.62 million square meters and a mall rental income of 5.012 billion yuan) and China Resources Land (with a floor area of 8.13 million square meters and operating income of 8.64 billion yuan).
Hangzhou Xixi Impression City, selected as the underlying asset for CICC Yingli Consumer REIT, was chosen after repeated comparisons and consideration of multiple factors by Yingli and institutions. In Vanke's commercial asset portfolio, its floor efficiency and performance growth are also among the best.
Li Wenzheng, General Manager of Credit Insurance Fund REITs Platform, believes that consumer infrastructure projects have strong differentiation and require active management, earning &#34;alpha&#34; money (i.e., products).
This means that in order to win the favor of investors, Vanke needs to create more Hangzhou Xixi Impression City.
Some institutional professionals also believe that commercial projects are highly dependent on the active management capabilities of the operating team. If Vanke wants to further break through in REITs, it needs to take further actions to gain investor recognition.
Separating commercial projects from the urban company and merging them into the commercial business unit with Yingli is also Vanke's hope to focus more on commercial operations and form a team that can compete with Longfor and China Resources.
Now, this burden falls on Sun Jia's shoulders. This is also a reshaping of Vanke's commercial capabilities, from commercial operations to capital operations, and the transformation has already begun.
Guojin Securities predicts that the scale of China's commercial real estate REITs market will reach trillions. CICC believes that as REITs form a considerable scale, the market value of related companies will also be revalued based on the asset valuation standards of REITs.
Vanke, China Resources, Longfor, and other real estate companies holding commercial assets will explore their own development potential and more possibilities for the future in a brand new track. With these changes, the real estate industry bids farewell to the era of grassroots and enters a new stage.

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Starting the year with a big move.

Vanke wants to continue leading in the second half.