I'm LongbridgeAI, I can summarize articles.Navigating the second half
Author | Zhou Zhiyu
The real estate industry has been discussing "new models" for several years, but the number of companies that have truly broken away from the old model can be counted on one hand. Most real estate enterprises are still trapped in a debt quagmire, and the few that have survived mostly rely on shrinking their front lines to gain some breathing room.
On March 27, LONGFOR GROUP held its 2025 annual results conference. Financial data reveals a structural change taking place within LONGFOR: while the development business is under pressure during the industry's winter, the operations and services business has grown into an independent profit-making entity with annual revenue of nearly 27 billion yuan, a gross margin exceeding 50%, and an annual profit contribution of nearly 8 billion yuan.
The pressure on the real estate development side is out in the open. National new home sales volume has been halved from its 2021 peak, and second-hand home prices have dropped by nearly 40%. The cost of a five-year adjustment is being concentrated in the settlement cycles of 2025 and 2026. LONGFOR has not been spared, recording its first core profit loss attributable to equity holders in 2025. This is not just LONGFOR's problem; it is a collective bill for the entire industry.
Furthermore, in 2025, LONGFOR's operations and services business achieved revenue of 26.77 billion yuan, a record high, with its share of total revenue rising to 27.5%. The gross margin for this business exceeded 50%, contributing 7.92 billion yuan to core profit attributable to equity holders. In other words, if viewed as a standalone entity, LONGFOR's operations and services segment is a profitable business with nearly 27 billion yuan in annual revenue and a net profit margin of approximately 30%.
Management provided a more specific timeline: by 2028 at the latest, revenue from operations and services will exceed that of real estate development. At that time, the EBITDA coverage of interest from operations and services is expected to reach 4 times.
Over the past three and a half years, LONGFOR has reduced its interest-bearing debt by 60 billion yuan, its operating property loans have surpassed 100 billion yuan, and its operating cash flow has been positive for three consecutive years. By the end of 2025, interest-bearing debt dropped to 152.8 billion yuan, and in 2026, group-level credit financing maturing will be only about 6 billion yuan, a sharp decline from 22 billion yuan in the previous year.
These are the broad figures. However, a detail easily overlooked at the results conference is that the four tracks under LONGFOR's operations and services segment—commercial investment, asset management, property services, and intelligent construction—each have different strategies and situations.
Tianjie (Paradise Walk) Commercial is the absolute main force of LONGFOR's operations segment, with 99 shopping malls, a 97% occupancy rate, and rental income of 11.2 billion yuan, with turnover in 2025 growing 17% year-on-year. This is a proven cash cow.
The property services track underwent a round of active contraction. Revenue was approximately 11.2 billion yuan, a slight year-on-year decrease, because LONGFOR voluntarily exited a group of projects with low fee rates and low service levels. Management stated that the adjustment is largely complete and is expected to return to double-digit growth in 2026.
The asset management track has upgraded from Goyoo long-term rental apartments to a combination of six major business formats and plans to open about ten "Chunshan Wanshu" elderly care apartments in the next three years.
The intelligent construction track, Longfor Long Zhizao, is an outlier: its 1.3 billion yuan in revenue is the smallest in the group's portfolio, yet it maintains high-speed development in a hyper-competitive industry.
Wallstreetcn has learned that in just the past few years, the number of entrusted development companies has surged from over a dozen to more than a hundred, leading to intense competition. Projects with fee rates below 2% already account for 45%, and those between 2% and 3% account for over 36%, totaling more than 80%. One head of an entrusted development firm bluntly advised other real estate companies to stop entering the already overcrowded market.
Chen Xuping, Chairman of LONGFOR GROUP, explained how LONGFOR could break out of this red ocean: LONGFOR does not participate in any irrational fee competition but instead earns income by creating greater value for the entrusting parties.
When an entrusted development project can help the client achieve a good price and rapid destocking, the client is naturally willing to pay a premium for operational expertise.
On a deeper level, the true moat of Longfor Long Zhizao is not just operational experience, but synergy from the parent company's various tracks. LONGFOR simultaneously possesses commercial operations, long-term rental apartments, property services, and digital systems. This combination of capabilities allows Longfor Long Zhizao to provide full-chain services from positioning and planning to delivery and operation. Purely asset-light entrusted development companies find it difficult to replicate this ecosystem.
This also happens to correspond with the industry's evolution. As the incremental market continues to shrink, existing stock renovation and the revitalization of distressed assets are becoming the true value highlands of the entrusted development industry. Longfor Long Zhizao has already validated these capabilities in the restructuring of the Chengdu Xijingtai project and the renovation of the existing commercial and office space at the Shanghai Lujiazui Jin 穗 Building, which is more telling than mere scale expansion.
Shifting the focus from Longfor Long Zhizao back to LONGFOR as a whole, a larger narrative is taking shape.
What this company has done over the past five years is essentially defusing two bombs simultaneously: one is the debt structure, and the other is the business structure. The new foundation—operating property loans, positive operating cash flow, and operations and services profits—is nearly complete. As Chen Xuping said at the results conference: "The foundation of the new model can only be fully built after the debt structure migration is complete."
Longfor Long Zhizao's role in this is to prove that the capabilities LONGFOR has accumulated over the years—such as digitalization and full-format construction and operation—can be detached from the heavy-asset framework and exported as independent service products to command a premium. This is a key link in the chain of deepening strategic transformation.
Of course, LONGFOR's transformation is not yet complete. 2025 and 2026 will still be profit lows, and there is still a tough battle ahead for inventory clearance in the development business. Management's promise of "resuming growth in 2027" needs to be fulfilled, as does the double-digit annual profit growth in the operations and services segment, and Longfor Long Zhizao's ability to maintain high-speed growth amid downward pressure on industry fee rates needs continuous proof.
But at least for now, LONGFOR has presented a clear path: in the deepest winter of the industry, it has not relied on selling assets to survive, but on its operational capacity to generate cash flow, while exporting this capacity to create value.
LONGFOR has provided an observable sample for the answer to the "new model." As to whether the sample can become a paradigm, that will require time and performance to answer.