Every reporter Zhen Sujing Every editor Chen Mengyu
Land reserves have always been an important indicator to measure the competitiveness of real estate companies. Urban renewal, as one of the important ways for real estate companies to obtain land reserves, has gradually become a new indicator of corporate competitiveness. my country's "14th Five-Year Plan and Outline of Long-term Goals for 2035" clearly proposes the implementation of urban renewal actions; in early November 2021, the General Office of the Ministry of Housing and Urban-Rural Development issued the "Notice on Carrying out the First Batch of Urban Renewal Pilot Work" and decided The first batch of urban renewal pilot projects were launched in 21 cities (districts) including Beijing.
With the promulgation and implementation of relevant national policies, urban renewal ideas have undergone major changes. How to update the thinking model in the new environment and re-examine urban renewal from a strategic perspective? What are the investment intentions of financial institutions in urban renewal projects in 2021? How will future urban renewal projects be closely integrated with finance? How to innovate the urban renewal financing model? In this regard, a reporter from "Daily Economic News" conducted an exclusive interview with Luo Yu, managing director of Heyi Urban Renewal Group.
From heavy development to heavy operation
The "14th Five-Year Plan and Outline of Long-term Goals for 2035" has raised urban renewal to unprecedented heights, and relevant policies in various places have also entered a period of intensive introduction.
In 2021, Beijing, Shanghai, Shenzhen, Guangzhou, Xiamen, Tianjin, Nanjing, Hangzhou, Wuxi, Xi'an, Qingdao, Ningbo, Kunming, Jinan, Wenzhou, Fuzhou, Chongqing and other cities are all in the "14th Five-Year Plan" outline at the city level. It is proposed to implement urban renewal actions, actively promote the transformation process of old communities, shantytowns, urban villages, etc., promote organic urban renewal, and promote high-quality urban development.
How to update the thinking model and re-examine urban renewal actions from a strategic perspective under the new situation of urban renewal? Luo Yu said that the government is the top designer of urban renewal. By formulating urban renewal policies, it further clarifies how urban land is used, how future space is developed, and how market enthusiasm is mobilized. At the same time, policies will be continuously improved through exploration, which will help accelerate the development process of urban renewal in our country.
Luo Yu explained that the 2021 Government Work Report proposed to implement urban renewal actions during the "14th Five-Year Plan" period to improve the quality of urbanization development. From a policy perspective, the importance is self-evident. Correspondingly, by exploring future urban renewal business opportunities through policy directions, real estate companies' ideas for urban renewal will also change.
Nationally, the current urbanization rate has reached 64%. New urbanization hopes to change the traditional excessive real estate development model and explore the transformation to an urban operation model. This means that real estate companies need to configure and improve corresponding capabilities, such as the ability to introduce industries, the ability to help the government build infrastructure and public supporting facilities, and the ability to operate industrial parks, etc.
Funds prefer late-stage mature projects
As we all know, urban renewal is essentially a cross-cycle investment, and the operational complexity is far greater than that of clean land projects obtained from public market bidding. The important processes of urban renewal projects include announcement of intention to update urban renewal projects, inclusion in urban renewal plans, land and building information verification, urban renewal planning approval, implementation entity confirmation, land use approval, project planning approval, project construction, relocation and resettlement, project Pre-sale and so on.
The average cycle of a complete urban renewal project is 5 to 8 years, or even longer. Whether it is a real estate company or a financial institution, they should be fully prepared before entering an urban renewal project.
In 2021, when liquidity is tightening and real estate companies are experiencing frequent crises, people are paying more attention to the urban renewal market in subdivided tracks. Have the inflow and outflow of funds been affected? How will future urban renewal projects be closely integrated with finance? How to innovate the urban renewal financing model?
Luo Yu said that the early financing of urban renewal projects in 2021 has been greatly affected. Judging from the actual projects he observed and studied, in the first three quarters of 2021, urban renewal projects have failed in the two nodes of front-end planning and planning approval. The pre-stage financing has shrunk significantly compared to the past few years.
Regarding the source of funds, Luo Yu analyzed that real estate companies engaged in urban renewal each have their own characteristics. Some companies mainly use their own funds, and some companies use financial institutions. But at present, they mainly use their own funds. real estate companies are relatively more advantageous.
As the liquidity of real estate companies tightens, if urban renewal projects want to gain more support, financial institutions such as banks, trusts, and funds have become important partners.
Luo Yu told reporters that the impact of the default event in 2021 on the market is that financial institutions will no longer intervene in some early or mid- to early-stage projects as before. In order to reduce risks, institutional investment standards have also been improved. For example, financial institutions will be willing to provide financing support for projects that have double demolition signings (100% contracted area and number of contracted persons) and confirmed implementation entities.
Luo Yu’s analysis pointed out that when it comes to project selection, financial institutions will also prefer projects that are mainly commercial and residential in core cities, core areas, and core locations. However, as investors, financial institutions do not have strong ability to implement and control projects. Once funds are invested in the entire project, they will be in a relatively passive position. Therefore, they use professional third parties to assist them in completing post-investment supervision and realizing the project. A smooth exit is also very necessary.
In addition, various places are exploring the establishment of long-term effective mechanisms such as urban renewal funds. The central and local governments are actively introducing social capital to intervene in urban renewal. For example, Shanghai has established an urban renewal fund, which is an urban renewal fund led by local state-owned enterprises. Guangzhou has established an urban renewal fund led by local state-owned enterprises. Guangzhou Urban Investment took the lead in establishing the Guangzhou Urban Renewal Fund.
In Luo Yu’s view, unlike the traditional high-leverage and high-turnover commercial and residential development projects of real estate companies, urban renewal projects should be more suitable for equity investment, and have characteristics that are suitable for stocks but not debt.
It is necessary to form a unique investment and development system
Different cities have different implementation models of renewal. Different types of urban renewal projects face different difficulties, and the extent to which enterprises can participate is also different. Luo Yu pointed out that during the survey on investment in urban renewal projects, it was learned that currently enterprises generally encounter problems such as imperfect policy systems, uncontrollable investment risks, long project cycles, difficult demolition, insufficient professional talents, and difficulty in early financing of projects.
For real estate companies, the choice of urban renewal projects to be involved in is particularly important.
Luo Yu analyzed that first of all, city selection should focus on urban areas, such as the Guangdong-Hong Kong-Macao Greater Bay Area, the Yangtze River Delta and other economically strong areas. Secondly, we should pay close attention to the three factors of land development intensity of more than 40%, GDP exceeding one trillion, and net population inflow. A city with rigid indicators.
Based on the analysis of the current status of public and non-public markets in various cities and the supply structure of construction land, there is much room for urban renewal in the future, especially in large and medium-sized cities where financial funds are in short supply.
Luo Yu explained that taking the first-tier city Shenzhen as an example, stock development is still the main channel for housing supply, and centralized supply will "force" real estate companies to expand land acquisition channels, making land acquisition strategies more diversified. In addition, Shenzhen's future There is great pressure to supply 2 million housing units in 2015. Real estate companies should pay close attention to policy trends such as "accelerating the supply of residential land and increasing the proportion of public housing", seize high-quality project resources, and deploy controls in advance.
Precisely because urban renewal is essentially a cross-cycle investment, Luo Yu emphasized that real estate companies must face up to the unique investment and development system formed based on existing policies and market rules, and establish their own urban renewal investment logic and business based on the actual situation. Model, adjust the investment decision-making mechanism, and configure corresponding partners, teams, processes, capital operations, and incentive systems. Only in this way can it be possible to carry out urban renewal and cross industry cycles.
Daily Economic News
