Strong Risk Management Becomes Core Competitive Power, as Chinese Real Estate Sector Faces Re-shuffle

BEIJING -

The “Sales Rankings of Chinese Real Estate Companies for Q3 2009″ report released by CRIC (China) Information Technology Co., Ltd. revealed many new changes. However, the management models adopted by real estate companies may be the most core evaluation indicator behind the report. Sina Leju was the first media source to announce the release of this report, part of which is as follows.

The report pointed out that scale expansions don’t always mean extensive operations, and that pursuing details is the right way for current Chinese real estate developers to ensure success, which can be best represented by the “Evergrande management model.” Evergrande Real Estate Group, once the black-sheep of the industry following its failed IPO, inconceivably got through two winters one year later, and topped the Chinese real estate developer list, showing a very strong risk management ideology.

Experts analyzed that Evergrande is always able to address potential market risks with a forward view. Over the past several years, the company was consistently been forward-looking and thoughtful in talent development, land reservation, product establishment and capital savings, etc., achieving the steady accumulation of its scale and brand and continuously improving its ability in risk management.

During the pause of the planned financing of RMB12 billion to RMB15 billion in 2008, when Chinese real estate developers encountered a more serious winter, Evergrande didn’t take any short-term measures, but made a series of strategic decisions based on the company’s long-term growth: the company didn’t sell land, reduce standards of open projects or sell-off projects either. The company financed itself via international capital markets.

With respect to projects, Evergrande decided to properly adjust the speed of project constructions, adopting the strategy of combining urgency and delays, and retaining and shelving. In terms of financing, Evergrande successfully achieved capital and share increases in June 2008, attracting new international giants, including Hong Kong-based Zheng Yutong, Kuwait Investment Authority and Merrill Lynch, to invest in the company for the second time. With respect to sales, the company decidedly took the “high performance-cost ratio” marketing measure, identifying trends, reasonable pricing, quick sales and quick returns based on market conditions during last year’s China National Day holiday, successfully achieving hot sales and rapid capital returns.

Chinese media reported that Evergrande now owns a systematic, controlling system on project development costs. The company focuses on reducing costs and enhancing competitive advantages by taking measures in many aspects, including land acquisition, product design, bid invitation and procurement and management. The company entered cities and regions with reasonable land costs and great appreciation potential in advance, collectively inviting bids and procuring across the country. It significantly lowered prices for materials and equipment, while ensuring the quality of products.

In addition, Evergrande has strong rapid development advantages, developing projects quickly through its powerful and professional executive team. The company controls the period from land acquisition to sales between six and eight months, achieving the goal of the shortest investment cycle.

The report indicates that the Chinese property sector’s development model has changed, and this emerged change in the property layout will definitely become more and more obvious. No matter whether they are traditional public companies, or private enterprises, represented by Evergrande, or even major central-controlled enterprises, they will eventually compete with each other with their ability for sustainable development, of which, management and strong talents are core.

For more information, please contact: Kevin Fax: +86-10-5895-1005 Email: Kevinmts@sina.com

Source: Sina Leju

Kevin, +86-10-5895-1005 (Fax), or Kevinmts at sina.com