Chapter 303 Real Estate Speculation by Internet Companies
“It’s time to consider buying a building!”
Lin Zhenyang accompanied Zhang Yida around the various floors of the Colin Building where Ruixiang Group rented offices. He looked at the crowded and narrow workstations with people next to each other and sighed.
"Um!"
Zhang Yida nodded lightly, "Our group has more than 5,000 employees working in Colin Building, right?"
"Yes!" Lin Zhenyang smiled, "From the 20th floor to the 50th floor, the Colin Building has only 50 floors in total, and we have occupied 30 of them."
"There are 170 employees on the first floor, and the area is only 1,500 square meters. The average office area per person is close to 10 square meters, which is not bad. It is similar to Penguin's Chengdu branch."
Lin Zhenyang shook his head, "Nearly 10 floors have been allocated for the company canteen, employee fitness center, and entertainment center. The actual office area per person is probably only six or seven square meters."
"In this case, you talk to Colin Group and we can just buy the building."
Lin Zhenyang nodded, "This is a good idea! It also saves you the trouble of moving!"
"Actually, I think it would be most interesting to build a park of our own, like the second headquarters planned in Chengdu, with a supporting cultural and art business district.
The park is lined with green trees, blooming flowers, and musical fountains...
It’s not like the Colin Building, which is just a lonely building with nothing.”
Zhang Yida smiled and said: "Brother, wake up, this is the capital!"
"Hey, that's all I'm saying." Lin Zhenyang smacked his lips, "We really can't afford to build something like that in Rongcheng in the capital."
"Forget about repairs, can you find a 158-acre piece of land nearby?"
Lin Zhenyang said sarcastically, "How about we go to Tongzhou to look for it?"
"Nowadays, major Internet companies are building headquarters buildings, which are almost becoming the company's promotional business cards. We are now the fifth largest Internet company in the country. We can't let people fall behind too much, right?"
"The fifth largest Internet company?" Zhang Yida asked curiously: "Who blocked it?"
"Ahem...that unknown tabloid commented that in terms of market value/valuation, we are second only to BATJ."
"Then where did you put Leech Financial Services, NetEase, 360, Xiaomi, Magnesium Tuan, Didi and others?"
Zhang Yida smiled and shook his head, "Don't get carried away. We still have to keep a low profile. We are still far from the goal."
When Ruixiang Group held a board meeting and submitted the proposal to "purchase an office building," the directors were severely polarized.
State-owned shareholders, led by China Development Bank, are very supportive of property purchases and believe that this move is very reliable and much better than subsidizing users with billions.
Foreign investment banks led by Temasek believe that Ruixiang is still in the process of rapid development and should spend money on areas where it is more needed, such as mobile payment subsidies.
Penguin and Blackshirt Capital are not helping each other and can be regarded as neutral parties.
"Yida, tell me what you think. Why did you think of buying a house?" Xu Xiaoming asked.
The directors who were arguing also turned their attention to Zhang Yida to see how he would explain.
"Ruixiang Group has now rented a 30-story office building in Colin Building, accounting for 60% of the office area in Colin Building.
Every year, the rent we have to pay is 150 million yuan!
And with the rapid expansion of the company, the number of employees will also increase.
Before the second headquarters building in Chengdu was built, employees basically had to work in the Kelin Building in Beijing.
It is estimated that by next year, we may have rented the entire Colin Building."
Speaking of this, Zhang Yida said with a smile: "Anyone who knows the rising trend of housing prices in China knows that renting is worse than buying.
Ruixiang currently has more than 10 billion in reserve cash on its books, so it’s impossible to use it all to subsidize the mobile payment market, right?
The company's annual investment in scientific research can basically be sustained by other stable and profitable projects.
Therefore, I think it is okay to use part of the spare funds in the company's account to buy office buildings as a real estate investment."
The director sent by China Development Bank also agreed: "Mr. Zhang's idea is very good. Ruixiang cannot just hold some "virtual" assets, but must also acquire some real assets!
Having this office building as a signboard can also enhance the company's brand. In addition, when funds are tight, it can also be mortgaged for loans."
"Yes, in China, houses are hard currency. By buying the Colin Building, Ruixiang can not only save a lot of money on rent, but also enjoy the added value of real estate."
Lin Zhenyang is also inclined to buy property. He continued:
"In 2012, the Red Master bought two buildings in Jiuxianqiao, which is now the 360 Building in Wangjing. The purchase price at that time was US$218 million, equivalent to 1.384 billion yuan.
The construction area of these two buildings is 69,200 square meters, which translates into a unit price of 20,000 yuan per square meter.
Recently, 360 is undergoing privatization, with a loan of US$9.3 billion. The syndicate that provided the loan valued the 360 Building at around 2.7 billion to 3.5 billion.
This valuation has increased by 2-2.5 times compared to when I bought it in 2012!
In 2005, Dongfang Yu, the founder of New Oriental, bought the New Oriental Building in Zhongguancun at a unit price of 30,000 yuan per square meter. In 2012, he purchased it as a whole for 1 billion. In a media interview this year, he said that the value of his house in this location has increased.
5,6 times.
Senior Brother Yu told me privately that he regretted not buying more properties in the first place.
New Oriental only bought the smallest building in Tower B in Zhongguancun, Beijing. The other building was taken away by Sinosteel. It was worth 1.5 billion at the time and should be worth 5 billion now.
He said to me: "If I had bought it at that time, I would have closed New Oriental now. In fact, there is no need to do so many things in this world. After earning one vote, I can rest for the rest of my life."
And Shanda Boss Chen..."
Lin Zhenyang listed the stories of several big guys who made huge profits by buying office buildings, and everyone had mixed reactions after hearing this.
Zhang Yida smiled and said nothing. In that era, and in that era now, he could not earn so much.
The state-owned assets director headed by China Development Bank nodded repeatedly, looking deeply convinced.
The directors of foreign investment banks are also a little shaken. China's real estate is so popular that Internet companies have begun to include real estate speculation as their main business.
In the end, the board of directors passed the draft resolution to purchase the property.
…
"Mr. Lin, long time no see!"
In a luxurious office, Lin Zhenyang came to visit Mr. Lin, the chairman of Kelin Group.
Mr. Lin, who was in his fifties and had a slicked back hair, asked his secretary to make tea for Lin Zhenyang and said with a smile:
"Xiao Lin, your Ruixiang Group is really getting bigger and bigger. I heard that its valuation exceeds 200 billion yuan?"
"Haha!" Lin Zhenyang said with a smile: "It's just a fluke, the competition pressure is also great. Let alone valuation, if the performance is not good, the market value will plummet."
"You're so humble! I watched you and Mr. Zhang build the company step by step, and it makes me ashamed!"
Mr. Lin was also very sad. When Ruixiang first settled in Colin Building in 2013, it was a small company with about a hundred people, and it only rented two floors of small tenants.
More than two years later, it has grown to over 5,000 people and rented out most of the office building in their Colin Building, becoming the largest tenant of the Colin Group in one fell swoop.
It’s so fast to make a fortune on the Internet! It’s much more profitable than doing real estate on your own.
It took him nearly 30 years of experience in the real estate industry to build his current career. Colin Group barely has tens of billions of assets.
The other party’s nearly 3 years have surpassed his own’s nearly 30 years!
Whenever he thinks of this, Mr. Lin secretly thinks: If he were ten years younger, he would still want to work on the Internet.
Now, as I'm older, I can just collect some rent and live my life, so why bother?
"Mr. Lin, it's like this. Our Ruixiang Group wants to buy Colin Building. I wonder if we can part with it?"
After Lin Zhenyang exchanged a few pleasantries, he directly dropped this bombshell.
Mr. Lin was surprised, but he, who had been tested in shopping malls for a long time, concealed his emotions well and replied with a smile: "Xiao Lin, you... are really embarrassing for me.
Our Kelin Group rarely builds buildings now, and our assets are basically self-owned properties such as Beijing and Shanghai Pengyang.
For the rest of my life, I will just rely on these office buildings to collect rent.
As people get older, they no longer have any ambitions, and they don’t want to bother anymore.
I sold the building and got a large sum of cash. I don’t want to build a new building, and I don’t have good investment channels. If I put it in the bank, it will depreciate!”
"Mr. Lin, Kelin Group has more than a dozen office buildings in Beijing and Shanghai Pengyang, and there is no less than one like this!"
I heard that your group has recently acquired another piece of land in Magic City and will just build another building!"
Lin Zhenyang also did his homework before coming here, so naturally he would not be led by the other party.
Mr. Lin was not embarrassed at all by being "revealed". He had developed a thick skin over the years.
"Hey! Since Ruixiang Group wants to buy it, then you can just quote a price!"
"The construction area of Colin Building is 75,000 square meters. How about 30,000 square meters per square meter? 2.25 billion. We will settle the payment in cash in one go."
Mr. Lin said with a non-smiling smile: "Xiao Lin, I'm afraid you are joking. The housing prices around here are more than 40,000 to 50,000 per square meter. We want 45,000 per square meter, right?"
Lin Zhenyang shook his head, "In the same area, the price of office buildings is far lower than that of residential buildings. One has a 50-year property right, and the other has a 70-year property right.
Although I don’t do real estate, I still know something about it.”
"30,000 won't work! It's too low!"
Mr. Lin stopped testing Lin Zhenyang and started talking about business seriously.
“In the same area, office buildings are generally sold for more than 10,000 yuan less than residential buildings.
Mr. Lin, the most we can give is 31,000."
Mr. Lin is also a good businessman. He began to list various benefits of buying a property to Lin Zhenyang:
"First of all, after buying the Colin Building, Ruixiang doesn't have to move, right? Thousands of people have moved, which is time-consuming and laborious. Don't Internet companies value efficiency the most?
Secondly, China's housing prices are rising so fast. Ruixiang's investment in office buildings is definitely a business that will make a profit without losing any money.
…”
Lin Zhenyang also saw the tricks and began to list the benefits of selling property to Mr. Lin:
"First, it can quickly withdraw funds and reduce liabilities; second, it can invest in the development of new projects and achieve a higher return on investment..."
The two of them talked back and forth for a long time, but they still couldn't reach an agreement on the price.
After all, it is relatively rare for a big business worth billions to be negotiated in one day.
Seeing this, Lin Zhenyang said goodbye and left.
It's not like his trip was in vain. At least he figured out Mr. Lin's intention to sell the building.
If you are interested, we can negotiate the price slowly!