Revenue of R & F Guangzhou headquarters dropped by more than 70% compared with the same period last year.

SMM: the impact of COVID-19 's epidemic on the hotel and tourism industry is far greater than that of real estate. Data from the Ai Media Research Institute show that in the first quarter of this year, the average occupancy rate of domestic hotels was less than 20%. Although the prosperity of the industry gradually recovered in the second quarter, there is still a big gap with the same period in previous years, and the losses in the first quarter have not yet been made up.

This also brings a lot of pressure to the real estate enterprises with hotel assets. VANDA HOTEL earned HK $246 million in the first half, down 37.04 per cent from the same period last year, while Jinmao Hotel earned 611 million yuan, down about 50 per cent from the same period last year. R & F Real Estate, which acquired more than 70 hotels at Wanda and became the "largest luxury hotel owner in the world", also suffered a major impact. In the first half of this year, the turnover of R & F real estate hotel operation fell by 58.23% from 3.342 billion yuan to 1.396 billion yuan compared with the same period last year.

The pressure is not just from the hotel business. As of the first half of this year, R & F achieved only 33.6% of its annual sales target, and a number of core business data, such as sales, operating income and property sales gross profit margin, declined year-on-year. Or therefore, unlike the operations of other housing companies in the past and in the same period, R & F did not list the year-on-year changes of each data in its interim results.

Hotel revenue "halved"

R & F Real Estate said hotel business was the hardest hit, especially in the first quarter, when business and leisure travel were almost completely suspended due to quarantine and travel restrictions, and catering services in the hotel industry were also hit hard by all suspensions such as business banquets.

At the 2019 performance meeting held in March this year, R & F executives have admitted the plight of the hotel business. "at present, there is no way for the hotel to provide good news," Li said. "in the first three months, both cash flow and accounting are at a loss, and it is estimated that the annual NOP (return on investment) income of the hotel business may only be 50 per cent of the forecast at the beginning of the year."

R & F began to lay out the hotel industry in 2004, and its biggest hit was the acquisition of 74 hotels owned by Wanda in 2017. At present, R & F has 90 hotels in operation, including 10 luxury brands, 32 ultra-high-end brands, 43 high-end brands and 5 super-mid-range brands. Among them, there are 86 five-star hotels, accounting for 96%.

In addition to a large number of hotel assets, R & F also has office buildings, logistics warehousing and other holding properties. Holding property can bring stable cash flow through effective operation, optimize the asset structure of enterprises, and resist the risks brought to real estate enterprises by fluctuations in the real estate market, but it will also bring capital precipitation because of the long return cycle.

Similarly, there are many actions in the holding property industry, and while it continues to settle down in the cultural and tourism industry in recent years, it is also selling some hotel, commercial, and cultural and tourism projects, and Sun Hongbin said that the sale of some owned properties will be the norm. In Sunac's business composition plan, holding property and long-term equity investment do not exceed 15% of total assets.

In July this year, Evergrande launched 223 commercial projects, including shopping malls, office buildings, shops, hotels, conference centers, etc., with an area of more than 10 million square meters to be sold. The market believes that Evergrande sells such a large amount of property assets in order to reduce the debt ratio.

R & F Real Estate, which is also in urgent need of reducing its debt, is also beginning to have plans to sell. At the 2020 interim results meeting held on August 24, Li Silian, who insisted at the beginning of this year that "the hotel does not put much pressure on the company, does not use much money, and that the income from NOP, capital and cash flow is sufficient to pay the relevant interest", said that "there is a weight loss plan" and that there are plans to sell whether it is investment property or development projects. However, he also admitted that commercial property negotiations are generally slower, and some companies have to make restructuring and tax arrangements.

At a time when housing companies focused on residential development and achieved a jump in scale through high turnover, R & F, once the first of the five tigers in South China, was obviously lagging behind, and the excessive proportion of commercial real estate with slow cash return was considered to be the main reason. When the real estate market has said goodbye to the "golden era" of rapid development, how to get rid of the drag of commercial real estate or a difficult problem of R & F.

Guangzhou, the "stronghold", is tarnished.

A number of R & F business data showed a decline in the first half of this year, but revenue from property sales rose slightly by 3 per cent to 30.831 billion, due to an increase in the area of delivery already sold, with 3.35 million square metres sold in the first half, up 17 per cent from the same period last year. However, the average selling price fell by 12%, from 10400 per square meter to 9200 yuan per square meter.

Judging from the contribution of various cities, Taiyuan, Chongqing, Ningbo, Baotou and Harbin ranked in the top five, contributing 2.766 billion, 2.209 billion, 1.782 billion, 1.521 billion and 1.427 billion of turnover respectively, but the revenue of Guangzhou, the "stronghold" of R & F, fell further, from 623 million in the same period last year to 184 million, a drop of 70.47%, and the average selling price also dropped from 23500 / square meter to 8210 yuan / square meter. The ranking of city contribution fell from 22nd to 43th, with a revenue contribution ratio of only 0.6%, even inferior to cities such as Meizhou, Anshan and Jiangmen.

R & F held the top spot in Guangzhou's property market four times between 2008 and 2011, until it was overtaken by Poly by 2.5 billion in 2012. Guangzhou Yicheng accounted for 33.17% of the 30 billion contract sales in 2011, with agreed sales of 9.951 billion.

This has something to do with R & F's soil storage in Guangzhou. Of the 28.02 million square meters of land storage in R & F in 2011, the soil storage in Guangzhou is 3.861 million square meters, accounting for 13.78%, ranking second among R & F cities. In recent years, R & F has rarely appeared in the Guangzhou auction market, even if it is commercial or medical land.

Since July last year, R & F has made efforts to reduce its access to land in the open market in order to reduce its debt, and this strategy will continue in the future. Li Silian said at the 2020 interim results meeting held on Aug. 24, "recruitment and auction will slow down, large-scale, more than 10 billion yuan of land will not participate as far as possible, and most of the bidding and auction projects will be controlled at around 1 billion."

Although it has become negative in the open market, R & F, which started with the old reform, is still active in the development of the old reform project. In June this year, R & F won the old renovation of Datong Village, Tung Chung Town, Nansha, covering an area of 995000 square meters. On August 19th, it defeated Poly and won the renovation project of Shibi 1234 Village in Panyu, with a total land area of about 1.048 million square meters.

As one of the enterprises with the largest number of projects in the transformation of inner old villages in Guangzhou, R & F's old transformation involves about 16 old villages with a renovation area of more than 6.86 million square meters. With the acceleration of the old reform in Guangzhou, R & F is also stepping up its entry. In April 2019, R & F established the Urban Renewal Group, which focuses on the transformation of old cities, old villages and old factories.

Up to now, R & F has more than 80 projects in different stages of urban renewal, 92% in first-and second-tier cities and 54% in Guangdong-Hong Kong-Macau Greater Bay Area. Guangzhou, Taiyuan and Xi'an are the three most important cities in its old territory. In the next 18 months, R & F is expected to transform the old reform of 9 million square meters, which in turn will generate 200 billion yuan of potential marketable resources.

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