On the evening of July 18, COSCO Group (03377. HK) announced that COSCO Group, COSCO capital and Red Star Holdings formally signed an agreement to acquire 70% equity of Red Star real estate with 4 billion yuan. The three parties will effectively hold 35%, 35% and 30% equity of Chongqing Red Star Macalline Enterprise Development Co., Ltd. (hereinafter referred to as “red star enterprise development”), and jointly promote the follow-up development and operation of Red Star real estate.
In fact, as early as March 28 this year, COSCO capital announced that it had signed a cooperation agreement with Red Star Holdings, and both sides would launch strategic cooperation with red star enterprise development and its subordinate Red Star real estate sector. According to the agreement at that time, COSCO capital acquired 18% of the equity of red star enterprise development, and the consideration for equity transfer was 1.03 billion yuan.
In just over three months, the equity ratio of COSCO’s acquisition of Red Star Real Estate increased from 18% to 70%, and the acquisition amount also increased from 1.03 billion yuan to 4 billion yuan.
According to the announcement, the target company, together with its subsidiaries and joint ventures, holds a total of 91 projects in COSCO’s acquisition of Red Star real estate. At the same time, Hongxing’s property platform will also be transferred according to the price of book net assets, which will be 100% held by COSCO Group and COSCO capital.
A research institute analyst told reporters that after the rapid expansion of the scale from 2016 to 2019, the sales growth of COSCO Group will slow down in 2020“ Under the centralized land supply policy, the competition for land acquisition in the bidding, auction and listing market intensifies, and COSCO urgently needs to expand through acquisition and merger. ”
“Compared with the Yangtze River Delta and Dawan District, the recovery of the property market in Beijing Tianjin Hebei region is still relatively slow. In this atmosphere, the real estate enterprises that focus on the layout of this region have the pressure of de urbanization.” Bo Wenxi, vice president of China enterprise capital alliance, told reporters.
In 2020, the proportion of land reserves of COSCO Group in Beijing and the Bohai Rim region will be 26% and 22% respectively. This data shows that the company is highly dependent on the Beijing Tianjin Hebei region.
However, last year, COSCO put forward the development strategy of “moving south to the west” and increased the investment layout in the non Beijing Tianjin Hebei region. Industry insiders believe that the resources of Red Star real estate can supplement the deficiencies of Ocean Group in urban layout.
It is reported that red star real estate, established in 2009, is the main real estate platform of Red Star Holdings. In 2020, the sales volume of Hongxing real estate is about 40 billion yuan (excluding Hongxing real estate). At present, the value of Hongxing real estate for sale is close to 100 billion yuan. In terms of regional layout, East China, central China and West China account for more than 80%; From the distribution of business types, the proportion of marketable residential products is 80%.
“After the opening of the cooperation, COSCO’s land reserves in East China, central China and West China will be significantly increased, its regional layout will be more perfect and balanced, and its sales scale is expected to reach a new level.” COSCO said that according to the plan, Red Star real estate will contribute 30-40 billion yuan in annual sales in the next two years.
In addition, COSCO believes that the acquisition of Red Star real estate can improve the company’s gross profit margin. Red Star real estate projects are mostly obtained through bidding, auction and listing, and the gross profit rate can reach 25% to 30%; In 2020, the carry forward net interest rate of Red Star real estate will reach 15%, which is far higher than the average level of the industry.
In addition to the residential development business, the commercial projects and property management platform owned by Hongxing real estate are also valued by COSCO.
This cooperation also includes 21 commercial projects owned by Red Star real estate and a property management platform with a management area expected to exceed 20 million square meters in the next three years.