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Author | Cao Anxun
Editor | Zhou Zhiyu
With the help of many, Vanke, which is trapped in a busy season, welcomes the spring breeze of the real estate market.
On April 30th, the top level set the tone for real estate, proposing to digest existing properties and optimize incremental housing. Subsequently, Beijing, as a policy indicator for the real estate market, introduced new policies, announcing that eligible residents can purchase a new home outside the Fifth Ring Road.
This further strengthens the market's expectation of policy relaxation in the future. Real estate giants who have been waiting for the &#34;early spring&#34; in the real estate market can finally breathe a sigh of relief.
For Vanke, which is striving to overcome the current difficulties, this is undoubtedly a divine assistance. The peak of delivery and settlement, along with the current weak market recovery, has put pressure on Vanke's first-quarter report. Vanke is also facing a crisis like never before since its establishment.
Facing the current situation, Vanke's Chairman Yu Liang did not talk about the market outlook as he did in the past two years at the shareholder meeting on April 30th. Instead, he focused on what Vanke should do next, how to get through the current difficulties, and successfully move towards a new stage of industry development.
Whether it is stating that Vanke will firmly slim down, adjust financing methods, reduce risks, or focus on the development of integrated residential areas, property services, and rental apartments, it indicates that after this profound industry adjustment, Yu Liang and the Vanke management team have a clear idea of the road ahead.
With continuous favorable policies being released, Vanke can seize the current window of opportunity. Given time, it also has the hope to &#34;subtract&#34; like it did 31 years ago and become a benchmark in the industry on a brand new track. This is also the necessary path for companies to cross the cycle and become a century-old store.
<h2>Challenges</h2>
For the first time, Vanke's net profit attributable to shareholders in the first quarter was negative, and the net cash flow from operating activities was also negative. This first-quarter report submitted by Vanke truly reflects the current challenges it faces and the challenges faced by real estate companies in the industry adjustment.
Of course, this first-quarter report is to some extent affected by the cycle of the real estate industry itself. Open Source Securities pointed out that due to the decline in the scale of real estate development business settlements and settlement gross profit margins, Vanke's short-term performance is under pressure.
The Vanke management also admitted that they are indeed facing temporary operational difficulties and short-term liquidity pressure. However, Yu Liang has solutions for the current challenges.
At the shareholder meeting, Yu Liang stated that the company has formulated a comprehensive plan for slimming down and getting fit, will coordinate debt reduction and high-quality development, and will get the company back on a sustainable track to continue leading in the new stage of real estate development.
Specifically, Vanke will proceed in two steps. In the first phase, it will firmly slim down, adjust financing methods, and reduce risks. Over the next two years, it will reduce interest-bearing debt by over 100 billion yuan, and the total scale of interest-bearing debt in the next five years will be reduced by more than half; in terms of refinancing methods, it will gradually transition from the previous model of borrowing and repaying collectively, with the main focus on corporate credit, to a model that focuses on project and asset credit
In addition to the three main businesses of comprehensive residential area development, property services, and leasing apartments, Vanke will exit other businesses, clean up and transfer non-core financial investments. It will vigorously promote bulk asset transactions such as commercial and office buildings, with a plan to complete 20 billion yuan worth of transactions annually.
As Vanke President Zhu Jiusheng previously mentioned, it is difficult to switch financing models overnight, but fortunately, the cooperative banks have given Vanke a 1-3 year transition period to gradually make the switch. Now, Vanke needs to seize the current window of opportunity to reduce its debt burden.
From the first quarter perspective, thanks to bank support and its own efforts, Vanke's financing has gradually improved. Zhu Jiusheng introduced at the shareholders' meeting how to deal with phase liquidity challenges. In addition to the current 59 projects that have applied to be included in the whitelist, Vanke will also vigorously promote operational property loans and syndicated loans.
Since the beginning of this year, Vanke has added 16.8 billion yuan in financing withdrawals, with an average domestic financing cost of 3.33%, and the company's financing channels on the banking side remain smooth. Zhu Jiusheng is also confident about the progress of future financing.
The first phase of reducing debt and streamlining is not to say that Vanke will stop developing. The purpose is to focus limited resources on the three main businesses.
Yu Liang stated that the goal of the streamlining and fitness package is an ambitious one. It is also to show shareholders a healthier and more promising Vanke, rather than a Vanke that is barely surviving after reducing its debt. The purpose is to lay the foundation for the second phase.
In Yu Liang's view, the main content of future high-quality real estate development is good houses, good communities, and good services. The three businesses that Vanke focuses on have market prospects and social demand. There is still a broad space and prospects for improving residents' living conditions, leasing housing, and property services, in which Vanke has advantages.
What Vanke needs to do is to start afresh after subtraction.
<h2>Metamorphosis</h2>
In my impression, this is the second time in Vanke's history that they have proposed &#34;focusing on core businesses&#34;.
The last time was 31 years ago. At that time, Vanke's business was quite diverse, involving feed, clothing, home appliances, trade, and almost everything. If it weren't for founder Wang Shi proposing that Vanke should focus on residential real estate business and do subtraction, there wouldn't be the Vanke today that dominates with its professional capabilities.
Wang Shi also recalled the time of subtraction later, saying that an enterprise should focus on its core business and core strengths because there are too many examples of failure due to deviating from the course. Not knowing how to give up will never get anything, and sometimes subtraction is more important than addition.
Now, Vanke has come to the &#34;willing to let go&#34; moment. In the era of silver, to explore the &#34;second growth curve&#34; of the real estate industry, Vanke started to add, transforming from a residential developer to a city supporting service provider.
Today, external industry pressures and internal requirements have prompted Vanke to actively engage in &#34;subtraction&#34; again, allowing itself to refine its professional capabilities to a higher level. This is also the reason why Vanke has been able to be Vanke for over thirty years.
Vanke needs to start from its most advantageous position in order to break free from the cocoon that binds it and fly freely in the new stage of real estate
Whether turning crisis into opportunity and seeking victory in adversity depends on whether real estate companies dare to break through and innovate.
Vanke also hopes to make the right strategic choices again, planning for steady operation in the next few decades. This requires the courage to move forward with determination, strategic sensitivity to the overall situation, and a solid operational foundation.
To this end, Vanke has made certain preparations. The financial report shows that Vanke's revenue from operational service business in the first quarter reached 10.95 billion yuan, a year-on-year increase of 12%.
With the good momentum of operational services, in the first quarter, Vanke achieved a breakthrough in multiple tracks of REITs in operational business.
On the same day as the shareholders' meeting, China Jinmao REIT was listed on the Shenzhen Stock Exchange. Yu Liang deliberately shared this good news on his WeChat Moments, stating that the listing of Jinmao REIT today signifies that Vanke has added a channel from heavy to light in its operational business, marking a successful start.
At the same time, in March of this year, Vanke's Wanwei Logistics REIT was officially listed on the exchange, in addition to the leasing housing REIT actively applying for, Vanke is expected to become the only enterprise in the industry to achieve breakthroughs in three types of operational REITs.
This also marks a new stage in the development of real estate, adapting to the transition between old and new cycles, and achieving the necessary transformation of old and new models. By accelerating the transition to operators of real estate, Vanke aims to have a more stable ballast in its operational performance when dealing with industry cycle changes.
This road is bound to be challenging. Fortunately, Yu Liang and Vanke have the support of many fellow travelers.
Xin Jie, Chairman of Shenzhen Metro Group and Vice Chairman of Vanke's Board of Directors, once again voiced his support for Vanke at the shareholders' meeting, stating that as a long-term shareholder of Vanke, Shenzhen Metro Group's attitude and position towards Vanke have always remained unchanged, and they will continue to support Vanke's healthy development unwaveringly, regardless of market fluctuations.
Previously, Yu Liang celebrated the 20th anniversary of cooperation with GIC, having collaborated on benchmark projects such as Shanghai Qibao Vanke Plaza, witnessing each other's growth in China; Industrial Bank signed a 1.4 billion loan contract with a Vanke subsidiary on March 20, expressing firm support for Vanke.
Amidst the changing policy direction, the market has also shown a more positive attitude towards real estate. Recently, John Lam, Chief Real Estate Analyst at UBS, changed his pessimistic attitude towards Chinese real estate over the past three years to a more optimistic one. In a report, he predicted that Vanke's gross profit margin will return to 20% by 2025, and gross profit and core net profit will reach a turning point in 2025, reversing the decline.
Next, we will see a Vanke that is different from before. With the support of shareholders, banks, and other fellow travelers, it will blaze a new trail in the thorns and be reborn.
As a &#34;top student&#34; in the real estate industry, if Vanke can successfully break through, find the right track for the development of the second half of the real estate industry, it will be an inspiring achievement for the industry

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Vanke and others welcomed a divine assist