Vanke Property "Take Over" Gulangyu Islet Leading Property Urban Services Layout Accelerated

Since the birth of the first property company in 1981, for a long time, Chinese property companies have followed the housing price with the image of "after-sale".

Now, after about 40 years of development, the ambitions of the leading enterprises are no longer the community housekeepers. They begin to transform from single community management to "urban service providers".

Vanke property takes over Hengqin, Gulangyu Islet, poly property to take over Xitang... Unlike previous property services, the concept of "property city" has widened the boundary of property services and regarded the whole city as a large property community for operation and management.

While the head property accelerates the layout of city services, the stubborn disease of property earnings still exists. But the industry is full of confidence in the future of urban services. The urban services will continue to mature and will have a clear profit outlook after the expansion of the scale.

Big property vision

As one of the "three carriages", Vanke property is further developing in urban space service.

Recently, Vanke property and Xiamen Siming Municipal Garden Management Co., Ltd. and Xiamen city ring cleaning service Co., Ltd. jointly set up Xiamen Siming urban resources management and Management Co., Ltd., to provide the overall operation services for Gulangyu Islet.

The business scope includes public housing operation management in Gulangyu Islet, historical buildings protection and cultural upgrading, as well as services in municipal, garden, city appearance, environmental sanitation and so on.

This also means that the new space management layout of Vanke "property city" is further expanded.

The so-called "property city", that is, the use of market mechanisms, through the "professional services + smart platform + administrative power" in the way of integration of urban public space, public resources, public projects to implement the whole process of "management + service + operation", including municipal maintenance, property management, public life services and other diversified and multi domain business.

As early as 2017, Vanke property started its urban service plan and put forward the "property city" management mode.

The first item of the new business is the Hengqin New Area in Zhuhai, which is responsible for the management and operation of the public space in the Hengqin new area. Meanwhile, based on the practice of the project, Vanke has launched a new space management mode, that is, the urban spatial integration service.

Subsequently, the model extended to Xiong an New District, Chengdu high tech Zone, Guangzhou Baiyun design capital, and so on. Now it is extended to Xiamen Gulangyu Islet again.

Zhu Baoquan, President of Vanke property, said that the landing of major projects in the urban property field means the completion of the "three carriages" model of the company's space services, that is, CS community space, BS business space and US urban space.

And property services began to move towards urban management, which is also a trend in recent years.

After Vanke property's hand in hand with the Gulangyu Islet, Longhu intelligent service announced that it signed a contract with Yueyang Chenglingji Lingang management and Management Co., Ltd.

Longhu intelligent service indicates that it will carry out operation and management services to the new area of Chenglingji, which covers an area of 100 square kilometers. Taking Chenglingji new port area as a starting point, focusing on "Hong Kong production city", we should actively explore the urban service innovation mode.

Another leading property company started to enter the city earlier.

In 2016, Pauli property was distributed in Tianning Town, Dayun Town, Tao Zhuang Town, Xitang scenic spot and Luo Dian town in Jiashan county. Compared with Vanke's urban management, poly property was more involved in the management of public services in cities and towns in Xitang.

While exploring the new mode of public service, Pauli property has also held two "China social governance and collaborative innovation Mayor Forum" with the urban government with its business layout. In 2018, Pauli property formally put forward the "Zhenxing China" public service brand.

Coincidentally, Biguiyuan service also reached strategic cooperation with Hancheng municipal government of Shaanxi province in 2015, and jointly sponsored the establishment of Hancheng Biguiyuan City Service Co., Ltd., and launched a new mode of urban services. In 2018, the "urban symbiosis plan" was officially launched.

Zhu Baoquan, chief executive of Vanke property, said that as at the end of last year, Vanke had talked with more than 10 cities in the city's service projects, and the number will rise to 30 cities in the future.

Profit model exploration

At the same time, the profitability of new projects has always been the focus of attention.

Taking the listed companies as the example, the report of Baoli property in 2019 showed that the area of public housing and other properties reached 140 million square meters in the area of 287 million square meters, accounting for 48.9%, an increase of 105% over the same period last year, even exceeding the 48.4% of the residential community's management area.

Of course, it also comes down to the fact that public construction projects are based on the city and the project itself occupies a larger area. However, in terms of quantity, the total number of poly property in 2019 was 1010, while the public construction property projects were 266, accounting for 26.33%.

On the contrary, residential business is still the main source of income. In 2019, Pauli's residential community business accounted for 74.5% of the total revenue. Public and other property income in non residential properties reached 480 million, an increase of 115% over the same period last year, accounting for only 12.5% of total revenue.

Public building properties, which account for a continuous rise, have not yet kept up with the earning power, and profits need to be strengthened.

In the earnings report of Baoli real estate in 2019, compared with revenue and net profit over the same period last year, there was an increase of more than 40%, but the overall net interest rate of the company was only 8.4%, an increase of 0.5 percentage points compared with the same period last year, and the gross profit margin was about 20.3%, an increase of 0.2 percentage points over the same period last year.

CITIC Securities Research Report shows that the public service property in the public property category with low unit price and gross profit margin may expand too fast, resulting in the net profit margin of the poly property being hard to maintain at the original level, and the profit growth is not as good as expected.

In fact, when the new business continues to expand, property companies are facing some pressure to make profits.

Kerr data showed that in 2016, the operating cost of Vanke property was about 3 billion 300 million yuan, compared with 10 billion 300 million yuan in 2019, an increase of 212%. Meanwhile, Vanke's operating profit margin in 2019 was 17.96%, down 0.04 percentage points from the same period in 2018.

Ke Rui believes that although the decline in operating profit is affected by comprehensive factors such as rising labor costs, the "urban spatial integration service" that Vanke started in 2018 has been put to bear a lot of pressure due to its more test management ability.

As the first project of Vanke City service, Song Lantao, general manager of Zhuhai Da Hengqin City, once said that Vanke property maintained a small profit and stable state for Hengqin public space management business. The profit was basically maintained at 3%-4%, and the total annual entrusted contract was more than 300 million.

Insiders pointed out that the cost of urban services in the initial stage of development is relatively large, and there will be some profit problems. However, the urban services look for the future appreciation space and expansion space. After the relatively mature operation mode, the resources brought by urban services will expand the depth and breadth of business, and the corresponding revenue will also increase.

At the same time, because of the difference between public housing and property, there is a large area of property in the field of public construction, which can not be measured by single income and short term income.

However, Everbright Securities believes that urban services are expected to break the existing business scope of the property companies and move from the community to a broader urban public space. With the gradual popularization of business mode, the head property enterprises are expected to assume the functions of urban integrated management and operation platform and become "big housekeepers" of the city. This will significantly enhance the market position, resource co ordination and business scale of property companies.