Age of Legends

Chapter 223 Value Extraction Strategy

Liu Qi walked onto the terrace and, led by a waiter, sat down opposite the two people. He glanced at Zhang Chen, somewhat surprised that Chen Xuran had such a young man beside her, especially since Zhang Chen wasn't dressed maturely; he just had a casual, student-like air about him. Liu Qi definitely sensed something odd.

"Hello, Mr. Chen, the host! And this is your..." Liu Qi sneered and turned to Zhang Chen.

“My godson, Zhang Chen,” Chen Xuran said.

On Monday, she secretly brought Zhang Chen, who had taken a day off, out to discuss business behind Huang Huifen's back. She was very anxious and had to wait until Zhang Chen's grades improved, otherwise she might be blamed by Huang Huifen.

"Oh. Young man, you're lucky to have found such a good godmother. Who are your parents...?" Liu Qi was slightly surprised. He wanted to find out first. Chen Xuran was not one to be trifled with. He was somewhat suspicious that this young man was the son of some leader. If that was the case, then this matter would be quite troublesome.

Because this was undoubtedly Chen Xuran showing off his muscles to him.

However, Liu Qi also scoffed inwardly, thinking that any close relatives who dared to show themselves so openly in public were just putting on a show. Who was he afraid of? Even if someone stood behind Chen Xuran today, it wouldn't necessarily work. Was he easily intimidated?

“My mother is Huang Huifen,” Zhang Chen said.

Liu Qi was momentarily dazed before remembering who Huang Huifen was. There was no way around it; the establishment of Xuhui Real Estate was shrouded in rumors, like a makeshift operation suddenly set up. He had also heard about how the infamous feng shui depression of Hexianju had been acquired by a fool, only to be transformed into a hot commodity shortly after the government's planning was released, selling it for several times its original price.

As for Chen Xuran and Huang Huifen's collaboration to establish Xuhui Real Estate, Liu Qi has always considered Chen Xuran to be a formidable rival, while Huang Huifen is essentially a subordinate partner under her command. If he were to call her by her name directly, he wouldn't be able to recall who she is for the moment.

Looking at Zhang Chen, he nodded and said, "Oh, then you'll represent General Manager Huang."

This statement is somewhat dismissive.

What does it represent?
"Speak, you said you wanted to talk business. I wonder what business Mr. Chen wants to discuss with me?" Because Yipin Real Estate and Xuhui's park renovation project were in a zero-sum game of competition, Liu Qi had tried to copy them last time. Relying on Yipin Real Estate's brand recognition and marketing capabilities, he managed to steal Xuhui Real Estate's plan and use it for himself. Who knew that Chen Xuran would use the program to outmaneuver him, causing brands to flock to Xuhui's park business district instead, and he lost three million yuan in advertising fees.

Compared to the loss of his project value, the advertising fees were just a drop in the ocean.

Chen Xuran glanced at Zhang Chen, who then said, "Can I call you Uncle Liu?"

Liu Qi had been keeping an eye on Chen Xuran, but after Zhang Chen revealed his background, which turned out to be unexpected, he lost interest and casually said, "Just call me General Manager Liu."

Zhang Chen smiled and said, "The situation is like this. We know that your Yipin Real Estate park renovation project is right next to ours, Uncle Liu. It was originally intended to be developed into a refined park-like commercial district, but it clearly did not meet expectations. This is because many good brands will only evaluate one location in a given area, and there is often a clustering effect. So the contract we signed will cause your Shuadu Park to lose the opportunity to attract these brands, which will definitely affect the value of your location in the future."

Liu Qi chuckled: "You don't need to worry about that. I've already received reports on the progress of attracting businesses, and six luxury brands have already signed on. There are many more that are currently underway. In the second phase of the project, we will create the city's largest light and water curtain landscape. At that time, will we still have to worry about attracting businesses?"

Zhang Chen waited patiently for his rebuttal, watching Liu Qi's index finger, adorned with a jade thumb ring, tap lightly on the table. He then abruptly said, "We all know that an intention doesn't mean the final agreement. Without a signed contract, anything can happen. Moreover, the park-style commercial district is still a pioneering concept, and many brands will only create one demonstration site. A demonstration means investing the best resources to build it."

“Young man…the value of a location needs to be considered in the long run!” Liu Qi waved his hand. “Besides, the night market economy has a huge market in Rongcheng. You should know about our Yipin Golden Street. It now has tens of thousands of visitors every night. Do you think my Shuadu Street was just built to look at?”

"So that's the business we're discussing with you. The long-term value of the location. We plan to package the ten-year operating rights of the shops in the Lanyuan project in exchange for a 40 million yuan investment from Mr. Liu's Yipin Real Estate, to jointly promote the concept of a park-like commercial district. We've seen Yipin Real Estate's marketing, and we believe you have the ability to earn several 40 million yuan from these ten years of operating rights. After all, the 'Shuadu' concept you previously promoted to attract investors is about sharing in a billion people's worth of value!" Zhang Chen interjected at the opportune moment, getting straight to the point.

Liu Qi, who had initially intended to retort, froze at this moment. "What did you say?"

"Forty million for the ten-year operating rights of the commercial district project redeveloped by Lanyuan Park, isn't that a high price?" Zhang Chen said. "Or perhaps Uncle Liu should reassess it, and we could find a few more companies to bid together?"

Liu Qi glanced at Chen Xuran, "President Chen, is this your intention? Did I hear that right?"

Chen Xuran smiled enigmatically: "My godson explained it a little more clearly than I did."

Liu Qi thought for a moment and then laughed, "You guys are out of money, so you're asking me to invest? Do I look that stupid?"

Zhang Chen then said, "The second phase of the loan from China Merchants Bank is already in the process of being applied for. Mr. Liu, you're in this industry too. Who would use their own money for development?"

"That's not reasonable. Why don't you earn that money yourselves?" Liu Qi chuckled, staring at the two of them.

"To be honest, the China Merchants Bank has adjusted its policies and temporarily increased interest rates and loan-to-value ratios. After developing the project, we feel that the payback period is too long. We also know that you, Mr. Liu, actually want to create a park-like business district concept. Since we have the same idea, why don't we exchange the operating rights for funds with you so that we can withdraw in time? Our company is small and not as big as Yipin Real Estate."

Liu Qi looked at Zhang Chen and realized that he could no longer underestimate this student-looking young man. He was speaking eloquently and had a quick mind, which was not like an ordinary student at all.

Huang Huifen has such a son?!

This kid is interesting! And he keeps talking about these kinds of deals, tens of millions of dollars, which some adults don't even have a concept of. Where does he get this confidence?
Moreover, these words seem quite reasonable. As someone in the real estate industry, he is very familiar with banking policies. Indeed, changes in China Merchants Bank's policies can put pressure on small companies like Xuhui Real Estate. Therefore, their desire to sell the ten-year operating rights is not surprising.

After all, raising the loan-to-value ratio and benchmark interest rate would put a lot of pressure on the cash flow of a small real estate company.

So, without his investment, can it still be done?
It's feasible, there's pressure, but it won't lead to collapse and bankruptcy. Liu Qi isn't gambling that they won't go bankrupt. The ten-year operating rights are indeed a huge temptation for him. However, he also has his weaknesses.

This weakness was then exposed by Zhang Chen: "I know Uncle Liu really wants to build a great shopping destination, but unfortunately, many good brands have chosen our Lanyuan, which means that the future of the shopping destination may not meet expectations. The land value-added tax settlement period is coming up, and we might even lose money. If Uncle Liu wants to withdraw, it is actually a good choice. You can make a profit from the ten-year operating rights, and then you can resell the shopping destination to find a new owner. At least you won't lose money."

This is true.

Liu Qi's original plan was to hype up the concept of a park-like commercial district, make his own entertainment venue famous, and then find someone to take over at a high price, cash out, and make a splendid exit. That was his profit model.

Who knew that Chen Xuran would snatch the high-end brand's entry, and Shuadu's reputation would be overshadowed by Lanyuan. Now Shuadu is in a limbo. Despite his stubbornness, he knows that once this concept is taken away, the construction may be a dead end after completion.

However, if they take over the commercial operation rights of Lanyuan at this time, they can at least profit from this project after selling off the existing Shuadu project.

Once Lanyuan is developed and the land is sold, its scarcity will become apparent. Then, the ten-year commercial operating rights can be resold at an even higher price, ensuring he makes a profit no matter what.

After a moment's thought, Liu Qi said, "2500 million. I'm considering taking it over and doing it."

what? !

Liu Qi's offer was actually higher than the 20 million yuan loan that China Merchants Bank could offer her, and Chen Xuran's hand holding the coffee trembled slightly.

Liu Qi glanced at her, but fortunately, Chen Xuran's composure was impeccable, and her expression remained unchanged.

Only then did Zhang Chen look at Chen Xuran and say, "Godmother, according to our appraisal... this money is too little, isn't it?"

Chen Xuran parted her red lips and said, "President Liu, I'm the one who came to you first, so I'll just say the price... three thousand five." Liu Qi smiled and said, "President Chen, two thousand five is within my authority. Actually, whether your Lan Garden is worth that price or not, we still need to conduct an internal evaluation and have the business department conduct research. I'm already violating company rules by doing so personally. If you really offer that price, I'll have to initiate the process, conduct research, and then make a judgment."

"Mr. Liu is joking. The real estate market changes every day. Are you trying to find a sword by sticking to the past? Whether we accept your company's assessment is another matter. We may not be able to wait for that process. If Mr. Liu feels it's not worth the price, we can hold a public tender. I think you're not the only ones interested in this project, are you?"

Liu Qi remained silent. He knew that Chen Xuran was certain that after the entire project failed, he could get the operating rights of Lanyuan and balance the accounts.

But from a business perspective, this makes sense now.

He determined that the bank had raised interest rates significantly for Chen Xuran, putting her under considerable pressure, so she needed money now. If he didn't take her in, Chen Xuran could find another buyer, and he believed that many people were still interested in this ten-year operating right.

After thinking it over again, Liu Qi finally said, "Thirty million. That's the bottom line."

After exchanging a glance with Zhang Chen, Chen Xuran nodded. "Okay. Deal."

Liu Qi stood up, reached out and shook hands with Chen Xuran, then turned to Zhang Chen and extended his hand to him.

Zhang Chen reached out and shook hands with Liu Qi, who gripped his hand slightly firmly. Liu Qi then withdrew his hand and said, "Zhang Chen, are you helping your mother with her business now? What, the young master of Xuhui Real Estate?"

Zhang Chen shook his head, "I'm still studying, a high school student."

Liu Qi's face froze for a moment. "A high school student?"

Although Zhang Chen looked young, Liu Qi assumed he was a college graduate running his family business. His demeanor, his thought process, and the way he led the conversation—Liu Qi felt this young man had unlimited potential. However, Zhang Chen's words completely shattered Liu Qi's expectations. High school? His business partners, the children of wealthy and powerful families, all in high school—were either obedient students or spoiled brats. None of them behaved like this young man.
If it weren't for his youthful appearance, it wouldn't be surprising to think he was a professional manager or the strategist Chen Xuran had hired.

Liu Qi asked, "Which high school do you attend?"

“Yude Middle School,” Zhang Chen said.

"Wow, what a high achiever! You must be a senior in high school by now!"

Zhang Chen nodded.

"The students at Yude High School are indeed different."

“It wasn’t always like me in high school; some people focused on studying. I just played around,” Zhang Chen laughed.

“I think so too!” Liu Qi said. Although Yude High School is one of the top high schools in Rongcheng, and there are certainly many geniuses and outstanding students there, Liu Qi could assure him that someone like Zhang Chen is rare. But it's understandable that he came from this school.

He took out a business card and handed it to Zhang Chen, saying, "If you want to have tea with your Uncle Liu in the future, just give me a call anytime."

He then said to Chen Xuran, "How about we have a meal together?"

Zhang Chen replied, "I need to rush back to school for evening self-study, so I won't eat dinner. It's been a pleasure working with you, Uncle Liu!"

Liu Qi left the teahouse, got into the back seat of his Rolls-Royce, and had his driver take off. He then made several phone calls, arranging for someone to assess the true value of the Lanyuan shops. It wasn't that he wanted to back out after finding out the details; since he had made up his mind to abandon the entertainment district and make money in Lanyuan, he was willing to do so. He simply wanted to calculate the costs and arrive at a precise estimate.

After finishing the call, he leaned against the headrest of his car.

Zhang Chen.

This high school student is interesting!
……

After Liu Qi left, Chen Xuran and Zhang Chen sat for a while before she could no longer maintain her elegant posture while drinking coffee. She got up and went to the door of the tea room, looking out into the corridor.

Zhang Chen turned his gaze away from the balcony railing and said, "President Liu's Rolls-Royce just drove off; he's definitely gone." Liu Qi's Rolls-Royce is a well-known car in Rongcheng, featured in many magazines and newspapers. Zhang Chen recognized it immediately—the license plate was full of 6s and the silver-gray paint was unique.

Chen Xuran was so excited that she stomped her high heels on the spot, clenched her fists, and shouted excitedly, "Ahhh... Godson, you're amazing! Thirty million! Liu Jianwei from China Merchants Bank only offered me eight million as collateral! I wanted to curse him for being a fool!"

“You’ve already cursed me a lot.” Zhang Chen’s lips twitched.

Chen Xuran quickly hugged him tightly! She kissed him on the cheek and then rubbed his head enthusiastically, saying, "So good, so good!"

Zhang Chen wiped the red mark off his face with a look of disgust, both amused and exasperated. "Godmother, please be mindful of your image! My godfather is going to be jealous!"

"I'm so sorry!" Chen Xuran quickly tore off several tissues and handed them to Zhang Chen, then helped him wipe his face, and said with a smile, "So what if Teacher Wang is jealous? You're his godson!"

Zhang Chen sighed and said, "Actually, giving up the ten-year operating rights was a last resort. We did give something in return. We can only rely on getting the pre-sale permit to recoup our funds."

The right to operate a business is a long-term, steady investment, and acquiring it guarantees a stable income over time. Having it is certainly desirable, but to weather the crisis, the only option is to sell it at a premium for cash. There's no way to have it all; nothing is perfect.

Facing the setting sun outside, Chen Xuran stared at him and said, "This is the alternative you were talking about?"

Zhang Chen nodded. "This is a value extraction strategy; information is power. We have the advantage of information asymmetry, and based on their propaganda, we also know their goal: to create a project that rivals our Lanyuan project. Mr. Liu's actions are essentially about driving up land prices and then cashing out at a high price."

I know his goals, his bottom line, and that we have what he wants. Therefore, this negotiation is highly disadvantageous for him. The so-called garden commercial concept is merely a marketing point he's found, and we've captured that high ground. His current headache is how to dispose of his "Shuadu" project in the future. We've offered him an alternative: buy our commercial concept. He can continue to hype it up, and at the same time, sell "Shuadu" at a loss, recouping his investment through the concept. If he doesn't do this, he'll face future losses.

"Our alternative to dealing with the shortage of funds is to exchange ten years of operating rights for funds so as not to be controlled by banks."

"In this process, the alternative solution is not the so-called best solution, nor is it the solution that everyone hopes to achieve; it is just the optimal solution under the current circumstances."

"Therefore, after weighing the options, he chose the option of investing 30 million to buy the ten-year operating rights. This is Liu Qi's best alternative."

“We chose Liu Qi because we share common bargaining chips, which allows us to close this deal. This is the value extraction strategy in business. Sometimes, enemies can become temporary allies. It’s just a different way of thinking. This theory was first proposed in the 1980s, but it has never been systematized.”

Chen Xuran pinched his face and stretched it out to the sides, "It's so great to have a top student in the family! You have to study hard and study a lot, because your mother and I will be able to inherit our business in the future!"

(End of this chapter)