Real Estate Fund Investment Under The Epidemic Situation: Short Term Pressure On The Market, The Biggest Difficulty In Project Management.

"For real estate funds, the main problem is the operation and management of stock items. In the stock market, if you operate a mature property, the rent needs to be reduced or even forced to rent arrears. If you are upgrading the old property, you have to face the problem of upgrading and rebuilding. In the incremental market, the development and sale of real estate projects are also facing difficulties. Recently, Sun Mingchen, founder and partner of Hong fund, said in an interview with the twenty-first Century economic report, CEO.

In recent years, the sudden new crown epidemic has had an impact on all walks of life, and the real estate industry has also been greatly affected. The bustling shopping center and office buildings have greatly reduced the flow of people. The industry is looking forward to the "golden three silver four" property market small spring, in a short time is also difficult to appear.

Under such circumstances, how can real estate funds control investment rhythm and adjust investment strategy? What kind of market opportunities are emerging in the epidemic cycle?

The market is short term pressure and tends to be stable for a long time.

Ma Linqing, a partner of five cattle holdings, told the twenty-first Century economic report that compared with the SARS epidemic in 2003, the new crown pneumonia epidemic is facing a great difference in the economic environment, policy background and the development stage of the real estate industry. The impact of the epidemic on the real estate market is not quite the same.

In 2003, SARS affected the sale of property in some cities in the two quarter of the year. But after the epidemic, sales of real estate were rapidly callback in the three or four quarter, and the annual sales growth was 30%. Today, the real estate market in China is bigger and slower, and the impact of the epidemic will be more direct. It may not only be a drop in sales figures for the first quarter, but also the annual growth rate will slow down.

"However, after years of development and experience, China's real estate market is more resilience, and housing companies are more abundant in coping with the crisis." Ma Linqing said. At this stage, the market is faced with more stringent regulatory policies. If some liquidity is temporarily opened, there will be more policy support in the land market, the sales side and the financing side, and the market adjustment will be more extensive, which can alleviate the short-term pressure brought by the epidemic.

For investment in real estate funds, Ma Linqing said, from the perspective of asset class, first of all, the most affected is commercial real estate. Commercial real estate was originally a gathering place for offline crowds, including retail, catering, entertainment and many other formats. But now we do not encourage everyone to go out. In the short term, they will have a greater impact on the tenants and property parties of commercial real estate.

Second, office property is relatively small. Although enterprises have postponed the resumption of work, a large number of enterprises in the second tier cities have gradually resumed their offices and production, and the state has provided support policies for small and medium-sized enterprises. After the epidemic is flat, the leasing situation and asset performance of office buildings will return to a stable situation.

Third, the housing market may have some volatility in the short term, but the impact will be relatively small in the long run. Ma Linqing said that the general property market will have a "little spring" in March and April, which is suppressed in the short term, but will be released after the epidemic is stable.

"In particular, the demand for newly built houses and improved housing needs to be released. People will realize the importance of better residential environment, housing design and property management to life. He said.

In addition, the epidemic may have a positive role in promoting logistics real estate. Because with the driving force of e-commerce sales, manufacturers' production intensity and the stocking efforts of electronic business are increasing, and the demand for high quality warehousing property is increasing. At the same time, with the development of fresh electricity providers, the demand for cold chain refrigeratory is more vigorous.

The biggest difficulty in project management

For the real estate fund itself, asset management is the most stressful link in the four links of investment and withdrawal.

Sun Mingchen said, "for real estate funds, the main problem is the operation and management of stock projects. In the stock market, if you operate a mature property, the rent needs to be reduced or even forced to rent arrears. If you are upgrading the old property, you have to face the problem of upgrading and rebuilding. In the incremental market, the development and sale of real estate projects are also facing difficulties.

"For the Hong fund, we are relatively lucky. Because we achieved a smooth exit from the target project last year, which has brought a good return to investors. He said.

The Hongyuan fund has successfully withdrawn from the project in 2019 because of its adherence to the investment value standard. However, due to the reasons for the outbreak, the preparation of the new fund of the company has been substantially affected. Sun Mingchen admitted that the company had received foreign investors from South Korea and other foreign investors at the end of the year, and conducted field visits and discussions on China's potential real estate investment projects. However, due to the impact of the epidemic, both sides have to postpone investment.

"Now that overseas investors have turned from optimism to cautious wait-and-see, domestic investors have turned from optimism to weakness, and investment participants have been deterred. At present, the impact on our fund management platform is significant." He said.

What the Hong fund is doing now is to protect employees' safety and comply with the state's epidemic prevention and control measures, so that everyone can work at home for the first time and keep communicating with investors at home and abroad. At the same time, Hong fund also uses overseas resources to purchase overseas epidemic prevention materials, and donate the epidemic area to the best of our ability.

"After the commissioning of the five cattle holdings in February, the investment rhythm remained in an efficient and steady state, because the early project reserves were relatively early. Basically, according to the investment plan of the year, all tasks of project investment, risk management and other tasks are in an orderly manner." Ma Linqing said.

Although the epidemic affects the short-term fluctuations in the real estate market, the investment direction of the five cattle holdings will not be adjusted. On the one hand, the company is also strengthening the project cooperation with the developers of the head, because they have technology, brand, cash reserves, and talent reserves, which are relatively less affected by the epidemic.

On the other hand, due to the impact of the epidemic, the state has favorable support policies for many industries. We will pay close attention to the investment opportunities brought about by the policy window, as well as some high quality project investment opportunities that are temporarily undervalued, and deeply participate in the process of industry integration.

"For example, some second tier cities hold commercial real estate held by small developers. They may be affected by the epidemic and the cash flow is tight in the short term. There are also regional housing prices in Wuhan, which may be relatively difficult because of the epidemic, but the real estate development trend in Wuhan is very good. These opportunities are within our concerns. " He said.

Industry evolution and investment strategy adjustment after the outbreak

For the development trend of the real estate market after the outbreak, Ma Linqing believes that in the future, the pattern of the real estate market will be further differentiated, and the attraction of a second tier city and an important metropolitan area will be further enhanced. Developers' understanding of industry, education and medical care will change, and consumers' demands for housing design and property management will be further enhanced.

Second, the technology penetration of the real estate industry will increase. "The original real estate mode is relatively simple, most developers are doing the project, to carry out cost control. But now for developers, technology talents and financial talents will become more and more important. How to use VR technology to conduct online drainage and how to reduce the impact of sudden events is a consideration for developers. He said.

Third, for real estate funds, the five cattle continue to be optimistic about the rigid demand and improved residential projects of leading housing companies, as well as commercial real estate and office buildings with assets operation and financing capabilities. Before the fund's investment may place more emphasis on location and quality, but after the outbreak, we will have higher requirements for functional design, facilities and equipment integrity, property management level and cash flow situation of commercial real estate and office buildings.

On the whole, the five cattle holdings will continue to focus on financial services and industry empowerment and tap more medium and long-term investment opportunities in 2020.

Sun Mingchen added that the epidemic will strengthen people's housing concept. For migrant workers working in the first tier cities and provincial capitals, they would prefer to have their own property in the work place and enjoy the owners' rights. For commercial real estate, if this period of hard times is maintained, it will usher in the good fortune of retaliatory consumption in the future.

In terms of office buildings, some new economic enterprises may turn online office into a normal state after the outbreak. But for financial and other industries, what is more needed is face-to-face communication, and office buildings still need to be rigid. He said.

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