"Business Operation Model" Cade: The Development Logic Of Frozen Wages And Counter Cyclical Development Under The Epidemic Situation

As the largest diversified real estate group in Asia, Cade's heavily loaded China and Singapore are the countries that broke out earlier this year, which challenges the company's operation this year.

In February 26th, Cade released 2019 earnings, net profit after tax amounted to 2 billion 140 million yuan (10 billion 790 million yuan), an increase of 21.2% over the same period, and the return on equity rose to 10%, the first time in nearly 10 years.

On the basis of bright financial results, Cade has adopted strategies such as freezing salary increase and conserving dividend payouts in order to cope with the epidemic situation. It also helps merchants to develop online sales vigorously so as to keep the rental income of existing property stable.

Last year, net profit after tax was over ten billion.

For Chinese developers, Cade is a model of "real estate + fund", and has always been one of their research objects.

In 2019, Cade entered the Chinese market for twenty-fifth years. According to the earnings report, in 2019, the group realized the pre tax profit of 5 billion 67 million 600 thousand yuan (25 billion 590 million yuan), an increase of 22.3% over the same period last year, and a net profit of more than ten billion after tax. The net profit after operation for the whole year reached 1 billion 57 million 200 thousand yuan (5 billion 340 million yuan), creating a group's historical record.

The two largest markets in Singapore and China are still the main contributors. In 2019, they contributed 83.7% of the total pre tax profits of the group. The Chinese market was even more important. Cade's assets in China accounted for 41% of the total group, and China's net profit after tax accounted for 52% of the group.

Kade's management pointed out that the growth in 2019 was due to the contribution of the star bridge takeover business which was incorporated last year, as well as the gains from the newly acquired assets in 2018 and the assets invested in 2019.

In January 14, 2019, the Cade group announced a deal with Temasek to acquire 11 billion of the shares of the two wholly owned subsidiary of Affiliated Companies star bridge. After the completion of the transaction, Cade became the largest diversified real estate group in Asia.

Li Zhiqin, chief executive of Cade group, said that by adopting prudent capital recycling and management strategy, by the end of 2019, the group's net debt to equity ratio had dropped to 0.63. The target that was originally planned to be completed by the end of 2020 was completed one year ahead of schedule.

As of September 30, 2019, Cade's management assets in the world amounted to 131 billion 700 million yuan (about 658 billion 500 million yuan); the total development scale in China was about 23 million square meters, and the total assets of management were over 280 billion yuan.

Cade's real estate fund is also ahead of the industry. It manages 7 listed real estate investment trusts (REITs) and business trusts, as well as more than 20 private equity funds. It includes Tengfei real estate investment trust, Cade business estate trust, Ascott Guangzhou trust, Cade commercial China Trust, Tengfei India trust and Cade commercial Malaysia trust.

Challenges and opportunities under epidemic situation

The release of this brilliant financial report in the crisis that has not yet been fully lifted is an inspiring signal for Cade and commercial real estate developers.

Cade has entered 42 cities in China, and most of them are still in close control.

Among them, the epidemic center Wuhan is Cade deep tillage Town, Cade in Central China's largest complex project, is located in Wuhan, Cade XiCheng, with a total construction area of 400 thousand square meters, in addition to Cade, in Wuhan and Hubei also have many large commercial square.

Cade is responding to the challenges posed by the epidemic. In February 27th, Cade announced that the board of directors and senior management of the group voluntarily lowered their salaries by 5%-15%. Managers and employees were frozen to raise salaries, and other employees were not affected. The bonus of management and employees would be distributed as usual.

Luo Zhenyu, President of the Cade group, which is responsible for China's business, explained that the staff involved in the management level accounted for only 20% of the staff in China, and this is a phased behavior. It will be reassessed after 6 months or after the situation is stable.

In addition, the group's performance in 2019 was better than that in 2018, but equity dividends continued last year, with a dividend payment of $0.12 per share and a conservative strategy.

Luo Zhenyu believes that the epidemic is spreading all over the world, and how big the impact on China and the world economy is and how fast the economic rebound is.

"In addition to challenges, we regard it as an opportunity to upgrade strategy and enhance management capabilities, deepen digital platform development and enhance product strength." Luo Zhenyu said.

Under the epidemic, Kade quickly responded, and achieved remarkable results through the digital platform to help businesses online sales, and further accelerated the digital construction of Kant's own ecosystem.

With the help of precision marketing, a store's tenant tenants can sell 410 thousand yuan a day on a single day, and the average sales growth of new customers is 10% on the same day, and the average sales growth rate is more than 35% within a week. Through continuous online promotion, Cade members have more than 400 thousand daily live users.

Cade is a business management platform that started earlier in the industry for big data and user operations. The Kade star ecosystem has accumulated over 1500 users in recent years, including more than 10 million real members.

Luo Zhenyu believes that the epidemic has brought inspiration to the industry. The new retail mode is no longer a trend and concept, and become a huge practical demand. Office scenes will also greatly exceed the physical space and break the boundaries of time and space. These have put forward new requirements for technology, channels and operations.

According to experts predicted by Zhong Nanshan and other experts, the epidemic will be basically controlled by the end of April, when people will go out shopping, leisure and entertainment again.

What impact will these three months bring to commercial real estate operators and their businesses? Perhaps the answer lies in their immediate response.

Cade hopes that through prudent capital recycling and management strategies, it will remain resilient in the uncertain period of the epidemic and seek counter cyclical development opportunities.

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