Return to 1958 and build a century-old giant

Chapter 879 The Huge Profits of Hong Kong Real Estate

Investment in inland Europe is obviously not as smooth as in the UK and the US, so Yang Wendong's expectations are not high. His main focus in the future is to enter the market when a company is in crisis; otherwise, there will be almost no opportunities.

In this respect, Japan has made a great contribution. Whether it is automobiles, home appliances, heavy industry, shipbuilding, etc., the Japanese saga has had a huge impact on many of its counterparts in Europe and the United States. The European shipbuilding industry has almost collapsed, and the automobile and home appliance industries have also been greatly affected.
Next, he just needs to wait for the right opportunity;

The only pity is that he is not very familiar with European history, so he doesn't remember which European companies were in crisis in the 80s. However, he probably knows which European companies will be very strong in the future, so if these companies encounter problems in the future, he might be able to get involved.

If there really isn't any, then forget it. Investing in places like the UK, US, Japan, China, and Southeast Asia is enough.

In the following days, Yang Wendong spent several days traveling with his family in several German cities.
By early December, Yang Wendong had returned to Hong Kong with his family, concluding his more than two-week trip to Europe.

This trip to Europe was quite fruitful. I successfully invested in ARM and Mercedes-Benz. Although the investment ratios for these two companies have not yet been finalized, things are basically settled. As for SAP, it's fine if it works out, but if it doesn't, so be it. There are plenty of companies of this caliber in Silicon Valley, and there will be similar opportunities in the future.

In December 1980, Hong Kong's economy was booming, and real estate prices had reached astonishing levels.
For example, the Golden Gate Building was sold by Jardine Matheson to Carnegie Hall, owned by Chan Chung-ching. The transaction amount was only HK$11.2 billion in the middle of the year, but by November, it was sold for HK$17 billion. In terms of unit area, it was as high as HK$6500 per square foot (more than HK$60,000 per square meter).
Residential prices have also skyrocketed. In the outskirts of Hong Kong Island, the price per square foot for small apartments has exceeded HK$1000. The average monthly income of an average family in Hong Kong is only about HK$3000. If a family doesn't eat or drink for a month, they can only afford about 3 square feet of space (about 0.3 square meters).

This price is so high that it has far exceeded the limit that Hong Kong citizens can afford. The reason why it is still at a high price is because a lot of capital has been involved, including overseas, Hong Kong and even Chinese companies like China Resources, who want to get a share of the real estate market.

Too much madness has led to today's exorbitant housing prices.

On the 3rd, Yang Wendong called Zheng Zhijie over, and the two chatted about business over tea: "Old Zheng, how many non-core quality real estate properties do we still have?"

Cheung Hing Properties has been operating in Hong Kong for 20 years. In addition, Yang Wendong transferred funds from other fields in the early stages and successfully seized several peaks and troughs, so he already has a large number of properties in his hands.

Therefore, Yang Wendong also appropriately categorized these properties. Office buildings and shops in Hong Kong Island and town centers are considered high-quality real estate and will not be sold prematurely even in the event of an economic crisis.

For other locations, it's up to them, especially for residential properties. Changxing Real Estate does not participate in the rental residential business, unless it's a top-tier apartment in a core area.

Zheng Zhijie replied, "We have already cashed out most of our non-core properties. Only a few residential properties, which we developed ourselves, have not yet been fully sold."

"Well, how much money do you have on hand right now?" Yang Wendong asked.

Zheng Zhijie replied, "In terms of cash, we have about HK$36 billion, but we also have about HK$8 million in debt. These debts are tied up in corresponding projects, so I don't plan to use other funds to repay them. Instead, we'll wait until the projects are completed and then settle the accounts internally."

“Okay, not bad. Over the past few years, we’ve earned over 30 billion in cash and own a lot of real estate. That’s pretty good,” Yang Wendong nodded and said.

From 75 to 80, Hong Kong property prices continued to rise, so Yang Wendong naturally authorized Zheng Zhijie to act boldly. In addition, in 73/74 and even 67, Cheung Hing Properties bought up a lot of vacant land at rock-bottom prices. During this period, these lands were developed with full force, naturally generating a lot of funds.

Furthermore, a large portion of these properties were converted into unsold real estate, which are actually more valuable, but Yang Wendong has no intention of selling them. After all, during the economic crisis of 83/84, housing prices only dropped by half; while housing prices from 85 to 97 could rise by nearly 10 times.

Some prime properties, once sold, may be irretrievable. Yang Wendong is not the only one optimistic about the future of Hong Kong real estate; many other savvy individuals are also bullish. Especially after the mainland's reform and opening up, Hong Kong has become a bridge between East and West, and many people are patient.

Of course, Yang Wendong transferred a lot of funds away separately in order to speculate on gold, but these funds were later returned to Changxing Real Estate.

Zheng Zhijie laughed and said, "It's still Yang Sheng who gave the better instructions. I was just doing what Yang Sheng asked me to do."

"Hmm, what about Hutchison Whampoa and Wharf Holdings?" Yang Wendong asked again;
Hutchison Whampoa is a listed company, while Wharf Holdings has been privatized. Both are under the umbrella of Cheung Hing Properties, but their finances are independent.

Zheng Zhijie said: "Hutchison Whampoa has been developing its real estate business on a large scale in recent years and has long since paid off its debts. It now has about HK$15 billion in cash and its market value has reached HK$70 billion."

Wharf Holdings has also been developing its real estate business recently, but it was heavily indebted when it built Harbour City, and most of the profits from real estate sales went to paying off debts. Currently, it only has around 300 million HKD in cash on hand.

“Hutchison Whampoa is doing well, keep it up.” Yang Wendong then asked, “Wharf Holdings has no debt, so wouldn’t the annual rent of over 3 million from Harbour City be a stable cash income?”

Zheng Zhijie laughed and said, "Yes, Harbour City's business is very strong, there are many overseas tourists, and the rent is still rising. In the future, this one project alone may surpass many blue-chip companies."

“Okay, let’s just follow the established path.” Yang Wendong nodded and said, “Then, don’t develop any new real estate businesses. Gradually sell off all the existing properties that are available for sale. Then, the companies can just focus on collecting rent in the real estate sector.”

Not only Wharf Holdings, but also Hutchison Whampoa and Cheung Hing Properties itself own many shops, office buildings and other properties, which are stable cash income from long-term rentals. Although they are not as high as Shanghai Harbour City, they are not low either.

This is also the asset collateral that banks prefer, so even though these companies under their control may have a lot of properties, it is still very easy for them to obtain funds.

“Okay, Mr. Yang.” Zheng Zhijie then asked, “Mr. Yang, do you think the Hong Kong real estate market is about to collapse?”

“It’s hard to say, but I think current housing prices have already exceeded the limit for most ordinary people in Hong Kong.” Yang Wendong shook his head and said, “The essence of housing prices is actually how many people are willing and able to take over the highest price. Once it exceeds the limit, it will collapse instantly.”

Regardless of location, the essence of real estate is the same. Even the top office buildings in Central are ultimately paid for by ordinary people because the businesses of those who rent these office buildings are more or less connected to ordinary people through countless invisible threads. Of course, some foreign companies that are focused on the mainland market are a minority, but when real estate prices plummet, their investment will also decrease, and the principle is the same.

Historically, Hong Kong property prices had leveled off in mid-1981 and then slowly declined. However, thanks to the continuous influx of foreign capital, property and stock prices did not experience the sharp drop seen in 73.

However, in September 1982, the failure of Sino-British negotiations triggered an immediate collapse;

Nowadays, due to the existence of Cheung Hing Group, Hong Kong's exports have increased significantly, and tens of thousands or even hundreds of thousands of medium- to high-paying jobs have been created in Hong Kong. Domestic consumption is stronger, which will further stimulate the real estate market.

Yang Wendong cannot guarantee what the future housing prices will be like. They may follow the same pattern as in the past, and may collapse before September 1982, after all, 1973 is a cautionary tale.

Therefore, when the price is close to the target, you should withdraw and not try to make the last penny. This is because trying to make the last penny could result in huge losses, so it's better not to make it at all.

Zheng Zhijie nodded and said, "That's possible. Even our company's middle-level employees can't afford to buy houses on Hong Kong Island, so it's even more difficult for other ordinary people."

“These are things we can’t control, so let’s leave it at that,” Yang Wendong said. “In addition, we should ask Hang Seng Bank to tighten its personal housing loans recently, including those for our company. At the same time, we should cancel all our internal housing subsidy policies to prevent anyone in our company from getting caught up in them.”

Hang Seng Bank is also part of his assets, so at this time, he naturally has to give a reminder to avoid too many bad debts;

In addition, we should try our best to prevent our employees from taking over the properties at high prices. The group is already planning to gradually lay off employees. If many people are still taking over the properties at high prices, it will be easier to cause conflicts when they are laid off. Besides, they have worked for us for many years, so we should help them out as well.

However, this is ultimately a personal choice, and he can't interfere. He can only say that he doesn't encourage it and will no longer support it. As for these people taking out loans from other banks, there's nothing he can do about it.

“Okay, I’ll contact Mr. He.” After agreeing, Zheng Zhijie asked, “Mr. Yang, we also have many construction workers under our company. Most of them are outsourced, but some are our direct employees, and they are all skilled. If our entire business stops, what will happen to these people? Will we support them or what?”

“We can’t stop raising them, otherwise it will be troublesome if there’s a break in the supply chain, especially for the construction industry in Kinmen.” Yang Wendong thought for a moment and said, “Let’s send them to the deep sea. Starting next year, I’m also planning to invest heavily in real estate there. I previously requested that an office building be built in each of the four special zones. What do you think?”

When the four special zones were established, although Yang Wendong knew that Shenzhen had the greatest potential in the future, there was no need to ignore the other three special zones. So, while investing the most in Shenzhen, he also invested in the other three special zones.
On the one hand, it is also for its own investment needs, and on the other hand, it can also ensure that it can be successful in multiple cities. For example, when choosing suppliers, you need to have several.

Zheng Zhijie said, "Construction is already underway. The approval process in the four special economic zones is very fast. The land was acquired in just a few days. The blueprints are also identical. The teams are local engineering teams. With foreign exchange earnings, they are highly motivated."

“Well, a small office building doesn’t really need a good design, but in the future, our investments in the mainland will be on a much larger scale, which will require the talent from Kinmen Construction to participate. It would be most appropriate to transfer them there,” Yang Wendong said. “In addition, you can also prepare to invest the billions of Hong Kong dollars you have in the mainland.”

Zheng Zhijie was taken aback and asked, "Mr. Yang, investing billions? That's too much! Even the four special economic zones only have a total annual output value of a few billion."

“I know, I didn’t ask you to invest all of your money in a year.” Yang Wendong shook his head and said, “Besides, my target is not just the four special economic zones, but also major cities such as Beijing, Shanghai, and Guangzhou;
If your Four Seasons Hotels are not doing well overseas, then you can consider investing in hotels in mainland China.

The special economic zone's economic conditions are limited and cannot yet support the scale of the Four Seasons Hotel, but it can certainly accommodate hotels in Beijing, Shanghai, and Guangzhou.

The Four Seasons Hotel is positioned as an ultra-high-end hotel, and the cities where it is located must be metropolitan areas. The current four special economic zones are not yet economically strong enough.

Zheng Zhijie reminded him, "Mr. Yang, investing in places like Yanjing requires joint ventures."

“I know, joint venture it is, no problem. Let’s choose a good location first, make sure it’s large enough, and build it first.” Yang Wendong said nonchalantly, “I estimate that the mainland will still be able to accept wholly foreign-owned enterprises in the future, and we can just take back the other half of the shares later.”

In 86, the mainland began to allow wholly foreign-owned investment in non-sensitive sectors, including hotels. Therefore, if you choose to form a joint venture now, you can still get back the other half of the equity in 86.

Furthermore, if Four Seasons Hotels needs to establish its reputation, it must enter the domestic market as soon as possible. Otherwise, once other international hotel brands enter the market, the competition will be fierce. Therefore, this investment is not only about real estate returns, but also a proactive plan for the entire Four Seasons Hotels industry.

At the same time, many cities in China were short of hotels, so business was not bad. Historically, the earliest hotels established by Huo Yingdong and others basically broke even in seven or eight years.

“Okay, then I’ll discuss it with Mr. Tang,” Zheng Zhijie agreed.

Yang Wendong added, "Well, also, we should try to make the most of bank funds. We can try other banks, both domestic and foreign. Hang Seng's funds may not be enough. If we can leverage the funds to a high level, we can consider building hotels in other major cities. Please make a detailed investment plan for me to review."

If you can use bank money, you should. Only by using bank funds when you know that you can make money can you maximize your profits.

Zheng Zhijie smiled and said, "Don't worry, Mr. Yang, we are very familiar with capital operations."

"Okay, tell Tang Shengzhi that building hotels in the mainland is quite troublesome. Have him visit Huo Yingdong's White Swan Hotel project, which is under construction, and learn from it beforehand," Yang Wendong reminded him.

Huo Yingdong was thoroughly annoyed by the White Swan Hotel, but his experience would be a valuable lesson for foreign investment in mainland hotels in the future. He was just waiting for Huo to run into trouble so he could learn from his mistakes.

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(End of this chapter)