Detailed explanation of Debiwen’s way of creating asset management in China

Author | Tong Yang

Editor | Zhang Ai, Zhang Qi

Vision | Zhang Ai

Editor | Han Weiye

In the urban renewal market, the stock area of industrial remains is about 3 billion square meters, scattered in the north, Guangzhou, Shenzhen and Tianjin and the old industrial base cities in the past.Beijing alone has retired 233 old industrial plants, covering a total area of more than 25 million square meters.

In the past few years, the industrial heritage stock market has hatched two A-share listed companies: Derby Group and Jinhe Commercial. They take the content of cultural creation as the breakthrough point, and through the transformation and operation of "repairing the old as new", let the old factory glow with new life and explore new business opportunities in the real estate field.

Recently, Derby Group (stock code: SZ300947) released its first performance announcement after listing.The company achieved a total operating income of 955 million yuan and a net profit of 104 million yuan.The performance of the whole year was stable.

Figure 1: The stock price trend of Derby Group since its listing.

Source: Oriental Fortune (300059) Network.

01

Under the "second landlord" mode, the profitability is strong.

As an operation service provider of cultural, creative and technological innovation industrial parks, Derby Group’s main business is the positioning, design, transformation, investment promotion, operation management and in-depth value-added services to enterprises of Wenchuang Industrial Park. Its business model includes three categories:Lease operation, entrusted operation and equity participation operation.

The annual report revealed that Deby’s operating income in 2021 was 955 million yuan, mainly from leasing services, membership services and other services.

Figure 2: The proportion of all sectors of Derby Group in total operating income in 2021.

Source: Oriental Fortune Network

It’s not hard to see,Leasing service is the main source of revenue of Derby Group.In 2021, Deby Group’s rental service income accounts for more than 80% of the company’s total revenue, and members and other income correspond to entrusted operation and shareholding operation projects, with relatively small income and gross profit margin of only 1.92%.

The rental service income corresponds to the rental part of the "lease operation" project, which is essentially the "second landlord" model we often say, indicating that Derby Group mainly develops through "lease-operation". Although the outside world is sensitive to the "second landlord" model due to the "Ponzi scheme" of long-term rental apartments, from the data point of view, the gross profit margin of Debi Group’s leased operation remained above 37% from 2019 to 2021, and reached 48.34% in 2021.It is 4 percentage points higher than Jinhe Commercial, which is the leader of the same industry.Profitability is very strong.

Figure 3: Gross profit margin of leasing services of Derby Group from 2019 to 2021.

Source: Oriental Fortune Network

Ruihe think tank believes that Derby Group has considerable profitability. On the one hand, in the field of urban renewal, when urbanization develops to a certain stage, the value of a large number of old properties will inevitably be seriously mismatched with the value of the region.Therefore, the second landlord model is one of the important ways to revitalize existing assets and quickly realize resource integration.On the other hand, this is also inseparable from the cultivation of the whole chain operation system and brand power of the products by Derby Group itself.

02

Under the industrial chain, build a whole life cycle operation system.

In fact, the choice of business model is only a question of adaptability, how to establish industrial positioning, planning and construction, investment operation and customer service, etc.The whole life cycle operation system is the key to the success of light assets.

As most of the early cultural and creative parks were formed spontaneously,Only the rent level is used as the criterion for attracting investment, which has caused problems such as thin and broken industrial chain.For example, the industrial chain of Beijing 798 Art District is very fragile, its anti-risk ability is not strong, and its core competitiveness is insufficient, which leads to it being only a punching place in online celebrity.

Derby Group has been committed to a whole-process business chain such as project transformation, planning and operation, highlighting the ability to attract investment, and by purposefully selecting enterprises to settle in,Implement the integration of resource allocation in the industry to make the creative industrial chain in the park more complete.From the different stages of production, manufacturing, promotion and sales, the upstream and downstream of the industry can contact and communicate, resulting in the effect of 1+1>2.

During the reporting period, the average annual occupancy rate of Debi Mature Park has reached 93.5%, an increase of 4.5% compared with 2020.Among them, the occupancy rate of 9 parks reached 100%.And in 2021, the overall vacancy rate of Shanghai industrial parks will drop to 10.8%, while the overall vacancy rate of parks operated by Deby is only about 6.5%, far below the regional industry average.

03

Under branding, the scale has expanded rapidly.

In recent years, with the rapid development and maturity of Shanghai Science and Technology Park, the market tends to be saturated, so Derby Group has gradually stepped out of Shanghai.However, the premise of scale expansion must ensure that the industrial park of the enterprise itself is a systematic, branded and life-cycle high-quality park.Otherwise, it will be difficult to maintain stability.

With creative design ability as the core, Derby Group has continuously accumulated experience in park design, planning and renovation, and gradually launched a series of park brands such as "Derby Easy Park", "Derby WE" and "Derby Sports LOFT". After gaining a firm foothold in the Shanghai base camp, Deby will expand on a large scale in core first-and second-tier cities such as Beijing, Hangzhou, Xi ‘an, Shenzhen and even abroad. In 2021, the leasable area of Derby is 1,001,600 square meters, a substantial increase of 25.2% compared with 2020. This scale expansion will bring new income and profit growth for the company’s future development and help sustainable development.

Figure 4: Operation and management area of Derby Group from 2020 to 2021 (10,000 square meters)

Source: Enterprise Annual Report

According to the financial report data, Derby Group will be at the base camp in 2021.The gross profit margin in Shanghai is 42.27%.Strong profitability;The gross profit margin in Beijing is 27.92%.Although it is lower than Shanghai, Ruihe think tank believes that on the one hand, some projects are short-lived, and the project operation is in the climbing period; On the other hand, the existing high-quality projects tend to be saturated, the pressure of new projects is great, more funds are invested, and the turnover needs a certain period.

Table 1: Operating Income of Derby Group in 2021 by Region

Source: annual report of the enterprise (gross profit rate data of projects in other regions are not given by Derby Group in the annual report of the enterprise).

02

The Future Development Path of Production-Management-asset-light strategy Model

Although in the "second landlord" mode, there will be problems such as low project growth, limited profitability and land property disputes. However, both Deby Group and Jinhe Commercial can achieve healthy development under this model, which also proves its feasibility and brings some inspiration to asset-light strategy, a manufacturing industry.

1. Profit model: Multi-business seeks potential profit growth points.

According to incomplete statistics, by the end of 2019, there were more than 3,000 industrial parks in various provinces, cities and countries across the country, and it was estimated that there were more than 10,000 Wenchuang industrial parks without listing certification. In addition, many owners have begun to lay out creative parks or renovate old factories, such as Shanghai Textile Group and Shanghai Yidian Huaxin. The entry of these state-owned players will lead to the scarcity of high-quality assets in the market. Therefore,Private cultural and creative enterprises must broaden many business boundaries and constantly tap new profit growth points in order to continue to compete.

Just like Derby Group, as mentioned above, the rental income accounts for more than 80% of the total income of Derby Group. Under the dual landlord model, the profit structure is relatively simple.But at present, Deby is also actively developing property rights investment and service income.For example, Rude will take advantage of platform advantages and information advantages by "exchanging rent for equity", select enterprises with good growth, and invest in intangible assets such as cash, physical objects, brands and use rights to share the operating income of enterprises. However, the business is still in the cultivation stage and will become a new profit growth point in the future.

Besides,Derby is also deeply laying out the development of ecological business related to the operation of industrial parks.For example, taking Debi’s "West Hongqiao Debi Easy Garden" as an example, the company actively explores and cultivates new energy H2 business; At the same time, we are also exploring the distributed data center based on the park and related services such as communication, Internet of Things and traffic distribution.

Image source: the idea of the worm

2. Make full use of regional characteristic resources.

At present, the main body of the transformation of Wenchuang Industrial Park in China is old factories, and the characteristics of old factories in different cities and regions are different. The transformation of Wenchuang Garden emphasizes giving new life to traditional old buildings and reappearing their cultural characteristics. Therefore,In the transformation and design of the project, we should adhere to the orientation of the industry and culture of the park.Strengthen the excavation and support of cultural resources to avoid the problem that the cultural foundation is weak and cannot support its development and fall into the low-end business model.

For example, Shanghai Changning Debi Park, formerly known as Shanghai Aerospace 809 Computer Research Institute, has made great contributions to China’s space industry. During the transformation, Deby insisted on the cultural orientation of "simplicity and change" in the Book of Changes, and continued the simple, elegant and secluded style of the Aerospace Research Institute, providing enterprises with a garden-like office experience in Frank Shu. After the completion of the Shanghai Changning Debi Park project, hundreds of well-known multimedia enterprises at home and abroad and nearly ten multimedia professional organizations have gathered, including Public Comment Network and lagardere, a fortune 500 enterprise. At present, it has been rated as the demonstration park of Shanghai Cultural and Creative Industry Park in 2021-2022.

05

tag

We say that Wenchuang Industrial Park wants to achieve long-term and stable development. On the one hand, no matter which operation mode is adopted,We must intensively cultivate our own operational service capabilities.Create an operating brand with its own characteristics; On the other hand, grasp the outlet of industrial investment and cultivate industrial investment business in a timely manner.Realize diversified channel profitability.

During the "14th Five-Year Plan" period, the cultural industry is still in the "development window", and the competition between cultural and creative parks will be more intense. It remains to be seen whether Derby Group and Jinhe Commercial can hold the top spot in the cultural and creative industrial park.

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This article was first published on WeChat WeChat official account: Real Estate Asset Management Network. The content of the article belongs to the author’s personal opinion and does not represent Hexun.com’s position. Investors should operate accordingly, at their own risk.