As July unfolds, listed real estate companies have begun to disclose their performance briefs for the first half of the year. Beyond the somewhat anemic explanations, some developers are also showing a positive side.

On the evening of July 12th, Longfor Group released its performance announcement, achieving a sales amount of 51.12 billion yuan from January to June this year, with a contracted sales area of 3.655 million square meters, firmly ranking in the top 10 of the industry.

In fact, as a veteran real estate company, Longfor Group's every move is now attracting more attention. The reason behind this is not only because its sales scale has long been in the top ten of the industry, but also because as the turbulent tide recedes, the industry is increasingly looking forward to a pioneer of a new development model to break the shackles of the originally single revenue structure of real estate companies.

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Longfor's operational businesses beyond development have always been highly anticipated. In the first half of the year, Longfor achieved operational income of about 13.94 billion yuan (including tax), a year-on-year increase of 7.6%, setting a historical record. Among them, the revenue from operating businesses reached 7.07 billion yuan (including tax), and the revenue from service businesses was 6.87 billion yuan (including tax), both achieving growth.

It can be seen that the proportion of Longfor Group's operational business income compared to real estate sales income during this period has reached as high as 25.6%. The "source" of development business that once grew, and the "flow" of the operational and service tracks, have now achieved independent growth, occupying a more important position in Longfor's revenue, profit, and cash flow contributions.

If cash flow is the lifeblood of a company, Longfor Group has now introduced a "fresh stream" of it. In this special period of quality improvement and gear shifting, Longfor is accumulating the strength to withstand cyclical fluctuations with a rich business composition ecosystem.

The "anchor" within the fluctuation cycle

In 2024, with the urbanization rate exceeding 65%, the slowdown of real estate growth, and the rise in operating costs, the entire real estate industry bids farewell to the past "three highs" model, enduring unprecedented pangs.

The real estate industry is moving towards a new model of high-quality development through twists and turns. In such a process of change, Longfor is approaching a higher-level development model, especially in the field of operational businesses, where it has successfully entered the harvest period.Among them, a solid commercial foundation is one of the important labels of Longfor Group. Against the backdrop of the industry's overall shift from incremental to stock growth, it has achieved a steady development pace. At the 2023 annual performance conference, the management of Longfor Group mentioned that in 2024, 14 new shopping malls will be opened, including 8 heavy assets and 6 light assets. This also means that the number of commercial projects opened by Longfor in 2024 will exceed 100, and Longfor will officially enter the "Hundred MALL Era".

Now, half a year "handing in the exam paper": Chengdu Dong'an Lake Tianjie, Nanjing Yushan Tianjie, and Chongqing Yunling Tianjie have been opened one after another, Chengdu Sanqianji has been rejuvenated and made a new appearance, and Longfor's performance in the core areas of high-energy cities is eye-catching.

At present, the industry needs to transform to a new development model. Real estate companies will seek to obtain long-term stable recurring operating income in addition to real estate development business. In addition to obtaining rental income through heavy assets, it is necessary to introduce equity investors for assets to obtain asset and capital management income, and finally to manage the assets of third-party owners on behalf of them, to achieve operation management and brand income.

In 2024, to meet the era of large-scale asset management, Longfor has integrated resources to comprehensively promote product upgrades with operational thinking. On April 16, Longfor Group released a new asset management brand "Xiaoyaozhou Asset Management", and correspondingly, the original long-term rental apartment channel was upgraded and renamed as the asset management channel.

Xiaoyaozhou Asset Management is positioned as a "full-cycle and full-format asset management operator", covering six major businesses including long-term rental apartments "Guan Yu", vibrant blocks "Huan Si", serviced apartments "Xia Fei Mansion", industrial offices "Blue Ocean Engine", maternal and child hospitals "You You Baby", and retirement apartments "Chunshan Wanshu", to achieve a virtuous cycle of improving the quality of stock and increasing investment.

The continuous advancement of business, coupled with the rich space developed by Xiaoyaozhou Asset Management, has driven Longfor Group to achieve an operating business revenue of 7.07 billion yuan (including tax) in the first half of the year.

In fact, this operating business is widely regarded as the stabilizer of Longfor Group in the fluctuating cycle. According to the latest report released by CICC, Longfor Group, as a rare "development + holding" target, is expected to preserve high-quality assets and polish capabilities through high self-discipline and active actions in the downturn, and unlock the valuation reshaping brought by the superior model after the industry's basic face is repaired.

New quality growth reconstructs competitive advantage.

Survival of the fittest, the survivors are all strong.The new cycle signifies an upgrade and leap in traditional productivity. Longhu's steady growth in operational performance is attributed to business model innovation, fostering new quality productivity, reshaping growth paths, and creating a new growth curve—strengthening operations and service businesses is the sustainable force for development.

From Longhu's business layout, we can see that "One Longhu," "Three Major Sectors," and "Diversified Ecosystem" demonstrate strong vitality.

This is naturally inseparable from years of business accumulation. For instance, commercial investment is a business that Longhu began to layout in 2000, and it is the accumulation of time that has led to the establishment of the two major commercial brands "Tianjie" and "Xingyuehui" in high-energy cities across the country.

After more than 20 years of experience accumulation and practical exploration, Longhu not only maintains its development track at the forefront of the industry but also places greater emphasis on building a "light and heavy" diversified system centered on users, providing partners with the industry's highest quality and best services to achieve value sharing.

In 2021, Longhu Commercial launched light asset business, accelerated the national grid layout, and in just three years, it has made significant progress in the light asset track. To date, Longhu Commercial has accumulated more than 30 light asset projects. In June of this year, Longhu reached a cooperation with Hangzhou Qianjiang Refrigeration Group to jointly create the first Xingyuehui project in Hangzhou. This is the 14th commercial project Longhu has laid out in Hangzhou and the 5th light asset project.

Beyond operational businesses, Longhu Group's service business sector is equally eye-catching.

Among them, Longhu Smart Life involves residential services and commercial urban services, as well as four major value-added businesses: community value-added, new retail, housing sales and rentals, and engineering services. In 2023, Longhu Smart Life achieved a total revenue of 10.28 billion yuan, with a gross margin of 30.6%, property management area reaching 360 million square meters, and customer satisfaction exceeding 90% for 15 consecutive years.

In the first half of 2024, Longhu Smart Life was awarded the "2024 China Park Property Service Power TOP20 Enterprises," 2024 China Property Service Smart Service Sample Benchmark Enterprise, and 2024 China Property Service Office Property Service Sample Benchmark Enterprise, among other honors, which are highly recognized by the industry.

From January to June of this year, Longhu Group's service business revenue was 6.87 billion yuan (including tax), which not only includes the continuous growth of Longhu Smart Life but also the rise of the new business Longhu Longzhizao, signifying that Longhu's business boundaries have been reshaped, and innovative growth has new opportunities. In the first half of 2024, Longhu added 26 new agency construction projects, with a total construction area of 4.32 million square meters, and has accumulated more than 110 agency construction projects, with a total construction area exceeding 21 million square meters.

In the digital track, Longhu is also actively deploying. On May 13, 2024, Longhu's Qian Ding Digital Science "4+N" smart space technology product matrix was officially released, focusing on the construction and operation of urban spaces, and promoting the integration and innovation of digital technology with spatial scenarios.Alone, one travels fast; together, one travels far.

In an environment marked by turbulence and fluctuations, resilience is the steadfast force that allows an organization to navigate through cycles. For a business, "resilience" equates to "adaptability."

When faced with the fierce winds and torrential rains of an economic downturn, if a company responds appropriately, its resilience is strengthened, and it may very well emerge from the storm to see the rainbow.

Firstly, Longfor maintains a clear understanding of the external environment and trends. "The only certainty is uncertainty" is not only a primary characteristic of the new economic era but also a core key for businesses to traverse cycles.

Secondly, Longfor has prepared strategies for response. Longfor continues to actively seek change proactively. Industry inflection points may involve market contraction and profit decline, but market demand still exists, and users still exist.

Thirdly, Longfor has a clear strategy and strategic execution, precisely adjusting the pace of change. Longfor's management has repeatedly emphasized that the future development of the company relies on internal momentum and the generation of positive cash flow from operations. Compared to development business, Longfor's operational income and profits are steadily and sustainably increasing, establishing a healthier profit model.

In addition to contributing stable cash flow from operational activities, Longfor's financing also remains unobstructed. According to Longfor's management, the increase in loans for operational properties exceeded 20 billion in the first half of the year. Therefore, Longfor has the financial strength to acquire seven plots of land in the first half of the year, covering cities such as Beijing, Shanghai, Hangzhou, Chengdu, Suzhou, Xi'an, and Foshan, with a total construction area of 510,000 square meters and an equity land cost of 6 billion yuan.

A safe debt structure is the cornerstone of Longfor's steady progress. On June 28, Longfor prepaid 2.65 billion yuan of CMBS bonds and redeemed 620 million US dollars of US dollar bonds on the same day. To date, Longfor has repaid a total of 7.2 billion yuan, with only 4.5 billion yuan of public debt remaining due within 2024, and the maturity dates are spread out, with no concentrated redemption pressure. Before the end of 2026, Longfor also has no overseas public bonds due.

HSBC believes that Longfor is one of the few private real estate companies that can still repay its debts on time and in full.

Alone, one travels fast; together, one travels far. No one can precisely predict the trend of the economy, nor does anyone know how far the future is, but Longfor always focuses on user needs, enhances cash creation capabilities, strives for a win-win situation in all directions, constructs a new development model, and strictly controls financial security. Perhaps this is the experience that enterprises can learn from to traverse cycles and forge resilience.