[Focus on WINS] WINS Investment: "The Way of Transformation" for Real Estate Funds
In the context of the great changes in the industry, how can real estate funds promote self-upgrading and business transformation to seek changes?
By Bai Ruoling, a reporter of China Real Estate Finance
WINS Investment is not only a veteran of real estate fund industry, but also an important carrier of the financial wing in the "one body with two wings" strategy of Gemdale Corporation. By relying on the strong platform of Gemdale Corporation and its own core competitiveness, WINS Investment has maintained steady growth and industry recognition in the field of real estate finance over the years. It also fully reflects the solid strength of the Gemdale Corporation's diversified layout.
In the current context of the reinforced uncertainty of real estate, real estate funds face various challenges. Recently, Xu Yafeng, president of WINS Investment, said that the previous development model of expanding scale and applying high leverage is withdrawing from the historical stage, and companies should focus on fostering internal strength, cultivating their own investment and operation capabilities, tapping their own inherent potential, and improving efficiency through management, so as to promote the overall quality of development.
Real estate investment under the "three red lines"
From the promulgation of the "three red lines" to last year’s experiment of "two centralizations" in land supply policy, they undoubtedly aim to strengthen the regulation and control at the investment and financing ends of the real estate enterprises.
"Whether it is the promulgation of the 'centralized land supply', the 'three red lines', or other regulatory policies, the government wants to prevent the blind development of the industry," said Xu Yafeng, president of WINS Investment, “companies have to control their impulse to develop too fast and maintain a strategic policy of steady development.”
The development model of expanding scale too fast and continuously applying high leverage is gradually withdrawing from the historical stage in the current macro-context. In the business philosophy of WINS Investment, enterprises should focus on fostering internal strength, cultivating their own investment and management capabilities, tapping their own inherent potential, and improving efficiency through management, thus promoting the overall quality of development.
At present, from the perspective of the whole real estate industry, the capital side, the project side, and the policy side are all facing great pressure and challenges. Such an industry macro-context has prompted industry-related companies to upgrade themselves and transform their operations to seek changes. By regarding the external pressure as a motivation for self-iteration, WINS Investment will not only invest in residential properties as its future business layout, but also increase investment in urban renewal projects, including industrial parks, long-term rental apartments, community commerce, and other holding projects.
In the past, it was generally believed in the industry that such projects have a long cycle and low short-term returns and involve high difficulty in operation. However, in WINS Investment's view, this is a new development path full of opportunities. Through such projects, WINS Investment is using long-term capital to develop long-term projects and achieve sustainable and stable investment returns.
From the perspective of international capital, international mature capital markets like the United States, Hong Kong (China), Singapore, and Japan rely more on the effective combination of holding assets to achieve higher project volume and scale effect as well as benign interaction and healthy development with the capital market, which also provides a good reference for private equity funds of Chinese real estate.
According to the judgment of WINS Investment, some international funds of public and private equity, including pension funds and endowment funds with longer duration, may enter into more cooperation and interaction with domestic companies and institutions of fund management for real estate equity investment in the future. There will be more room for development in urban renewal, holding property investment management, and international capital operation in China.
WINS Investment's "Way of Transformation"
In WINS Investment's view, private equity funds of real estate are ushering in a new period of opportunity, transforming from the traditional model of focusing more on residential development than on asset management to a new model of enhancing sustainable operational capabilities.
The investment business of residential development, including equity investment, small-share manipulation, or investment in agency construction, is a more mature model of investment business for WINS Investment. We will still maintain steady development of such business to keep a reasonable volume of business growth. Meanwhile, WINS Investment is increasing its investment in urban renewal, especially in industrial parks and other directions. Whether it is investment in industrial funds or direct investment in industries, these elements are more in line with the overall investment strategy of its group company, Gemdale Corporation, and also with the national policy orientation of prospering the country through industry and science and technology.
In 2021, WINS Investment and Gemdale Properties and Investment jointly invested inan industrial park project located in the core area of Guangzhou Science City, with a total building area of about 150,000 square meters, catering to the development of the regional market and the company's strategy. The project is held and operated with biomedicine, electronic information, and artificial intelligence as the main industrial positioning, which is in line with the current trend of economic development and the regional orientation of industrial layout.
In addition, in the sector of community commerce, based on the strong demand for daily consumption, cultural entertainment, interest cultivation, and comprehensive services from residents around the communities in the regional niche market, WINS judges that there is certain climbing space and value empowerment potential in this sector.
For this purpose, based on 17 months of upgrading and renovation, "Gemdale Oopcity" invested by WINS Investment in Shanghai has been transformed from a dilapidated and narrow space into a romantic and dreamy "cloud factory", a "parent-child fun place" and a gravitational field for convenient services. Having been in operation for a full year, Gemdale Oopcity has become a community-oriented shopping center with the theme of children's education and recreation, bringing great convenience and brand new service experience to the community owners in the area.
“Gemdale Oopcity”
Live view before transformation
Live view after transformation
Live view before transformation
Live view after transformation
Aerial view after transformation
Based on more than ten years of talent pool cultivation, and enhancement of operation management and asset management capabilities in the field of industrial parks and community business, WINS Investment is forming its unique management model and investment logic in synergy with the operational advantages of the industrial companies of Gemdale Corporation in their professional lines.
From the perspective of investment logic, on the one hand, WINS shows solid strength in capital integration ability, so it focuses on acquisition in the pre-project development stage. On the other hand, in synergy with the operational capabilities of Gemdale Corporation's industrial companies in industrial parks, commerce, commercial office, apartments, and other professional lines, we are renovating and upgrading the buildings themselves, and exploring and enhancing the value of the assets through comprehensive empowerment of asset operation.
In the future phase of project exit, the establishment and issuance of asset securitization financial products such as quasi REITs and CMBS is a more mature model that WINS Investment has adopted. In the meantime, we are drawing on the experience of infrastructure REITs, hoping to try the exit method of REITs in the sector of industrial parks in the future.
Public REITs boost investment in stock assets
The launch of public REITs will guide all kinds of funds to flood into the infrastructure sector and revitalize stock assets, which is of great significance to the entity’s strategic layout of stabilizing leverage. For the capital market, the expansion of investment varieties and the enrichment of investment channels also bring diversified opportunities and competition for funders.
The successful issuance of the first batch of public REITs meets the long-awaited expectation of the domestic market, which is a very important step that marks the real ability to channel the funds from the capital market to the underlying assets. By leveraging the allocation capabilities of the capital market, we channel funds into the core underlying assets, thus helping the market to reduce leverage and alleviate the pressure of high indebtedness.
The industrial parks and logistics covered in the infrastructure REITs already issued are also the underlying asset sectors that WINS Investment focuses on, which will provide case references and drawing-on significance for our future business development. Due to the transparency of the capital market and the standardization of capital transactions, the successful issuance of the first batch of public REITs will play a very far-reaching role in guiding the entire capital market, and even the investment market.
The future valuation of holding assets will, through the pricing by the capital market, reversely deduce the current income value of the assets, thus pricing the assets. Since the first batch of public REITs was listed more than half a year ago, the underlying assets have been running smoothly and the secondary market has performed well, both in terms of asset quality and subscriptions, and the public REITs market has continued to heat up with the recent issuance and listing of the second batch of products. In the future, the overall scale of public REITs will continue to expand, opening a new development pattern for the capital market.
In order to break through the traditional model of real estate private equity and asset securitization product, WINS Investment has also made some exploration and attempts in the REITs field. WINS Investment will mainly do some early-stage PE investment at present. The projects need a certain operation process to achieve stable operation and sustainable capital return. Therefore, WINS Investment's focus is now on the first step, i.e. acquiring projects through PE investment, and then helping the projects to transform, enhance, and add value to themselves through efficient operation capability, so as to achieve stable operation and stable cash flow.
"WINS Investment will continue to pay attention to the operation of underlying assets of invested projects, and will consider the combination with REITs at the appropriate time in the future to achieve exit from the capital market, and to open up the public offering market as far as permitted by the policy, and turn it into a stable-income product that the public can purchase, which is the operation strategy and direction desired by us on the track of public REITs in the future," said Xu Yafeng, president of WINS Investment.
In the new phase of industry development, WINS Investment is also moving towards the goal of being the most valuable international provider of real estate financial services. Innovative and diversified investment tactics, sound and high-quality development strategies, and professional and refined operation and management capabilities will be the driving force for WINS Investment's sustainable development.
