In Hong Kong, we build a global business empire

Chapter 124 Opportunities for Rise before the Real Estate Crisis
"Boss, if you want to develop quickly, it's actually very simple. The main problem of our Wan'an Group is insufficient funds, which to a certain extent limits our pace of expansion.

Let me give you an example. In March 1975, the Wan'an Group competed with several real estate companies for a piece of land in Wan Chai.

That time, we were determined to buy the land because everyone saw its value.

We even raised HK$5000 million for this purpose, of which HK$ million was the company's cash and the remaining HK$ million was advanced by your father. We did not borrow a penny from the bank.

As a result, the final transaction price of the land was HK$7600 million, far exceeding the HK$5000 million we raised.

If our Wan'an Group had been ruthless at that time and bought the land first and then applied for a loan from the bank, we could have continued to compete.

Unfortunately, we chose to give up at that time.

The real estate developer who bought the land made over 1975 million Hong Kong dollars in the previous year, more than doubling the rate of return, as housing prices had risen a lot compared to .

This is just one example. Since I joined Wan'an Group, I have witnessed too many regrets like this. This is also the reason why our Wan'an Group has developed slowly.

Of course, such a cautious investment style is not without its benefits. Let me give you an example that is closest to the present. In 1974, affected by the oil crisis, Hong Kong's real estate industry was affected, land prices fell by 40%, and house prices fell by 30 to 40%.

During that period, many real estate companies in Hong Kong that had expanded aggressively and were heavily indebted went bankrupt or were acquired one after another due to broken capital chains.

As our Wan'an Group had zero debt, although the profits plummeted during that period, we basically did not face any bankruptcy crisis, and we didn't even suffer any losses. It was just that the money we earned in those two years was much less, so we were able to get through it safely.

So, boss, if you want to develop quickly, the easiest way is to borrow money from the bank to expand our financial strength. Only when the funds are large enough can we have more development opportunities.

However, expansion often brings certain risks. For example, we are currently in the midst of an oil crisis. This time it seems that there is no impact on the real estate industry for the time being, but no one knows whether a real estate crisis will occur again.

So, it depends on your decision, boss." Yang Mingyi directly expressed his thoughts.

Lin Haoran nodded. The current Wan'an Group was indeed just as Yang Mingyi said.

For example, most of the group's funds are now used in the North Point project, plus it previously spent nearly HK$510 million to buy million shares of Ching Chau Cement.

Today, the entire group’s available funds are only a pitiful few million Hong Kong dollars. For a group, it is difficult to do anything big with this amount of money.

But in fact, Wan'an Group can fully utilize the advantages of the group to borrow money from banks and continue to develop more projects. It can fully develop two, three or even more real estate projects at the same time.

Instead, after a large amount of money is invested in a project, the group will have no investment strength before the return of the project is obtained.

It can be seen from this that although steady development can greatly reduce the crisis of the enterprise, it also wastes many development opportunities.

As for the real estate crisis, if nothing unexpected happens, three years later, in 1982, especially after a certain lady fell in front of the door of the City Hall, a very serious real estate crisis would break out again in Hong Kong.

This real estate crisis caused Hong Kong property prices to drop by 1982% from the peak in 1981 by the end of 60. By 1983, the market had collapsed completely, with a huge impact.

However, there are still three years left until that time, which is enough time for Wan'an Group to develop rapidly.

Moreover, the real estate crisis is a disaster for others, but for Lin Haoran, it is a great opportunity.

As long as he can grasp the opportunity well, he can use this crisis to enter Hong Kong's top real estate industry, provided that he helps Wan'an Group accumulate enough funds in these three years.

And now, he has to help Wan'an Group rise step by step, instead of developing slowly and steadily as before. This is not Lin Haoran's style.

"Mr. Yang, are there any good real estate investment projects now?" Lin Haoran leaned back in his chair and asked Yang Mingyi.

"As far as I know, the Hong Kong government will auction off a few pieces of land again in a few days. If you are interested, I can call the auction and ask them to fax us the information of the auction project. Then you can look for some land at that time." Yang Mingyi gave a suggestion.

Yang Mingyi guessed Lin Haoran's thoughts. Perhaps this new boss was going to take the route of taking out a loan.

He welcomed this decision. After all, only in this way could Wan'an Group develop rapidly. If it continued to develop according to its previous business philosophy, the gap between Wan'an Group and other real estate developers would only get bigger and bigger.

As the general manager of Wan'an Group and having worked in the group for nearly twenty years, he has a very deep affection for the group.

However, how the group develops is decided by the boss, not by him as an employee.

Lin Haoran nodded and said, "Okay, then you arrange it." Ten minutes later, Lin Haoran got a document about the land auction.

This time, the Hong Kong government put a small amount of land up for auction, only four plots, located in Kowloon Tong, Kwai Chung, Chai Wan and a reclamation project west of Ma Yau Tei.

After reading the introduction of these four pieces of land, Lin Haoran directly eliminated the reclamation project west of the sesame oil land.

The bidding price for the land for the reclamation project will not be too high, and the location of Yau Ma Tei is also very good, so the profit will definitely not be low.

But after winning the bid, he needs to spend his own money to reclaim the land, and then further develop it after reclamation. The cycle is too long. If Lin Haoran had a large amount of funds now, he could have won it, but he doesn't!
Therefore, Lin Haoran turned his attention to three places: Kowloon Tong, Kwai Chung and Chai Wan.

Chai Wan is suitable for developing industrial buildings, while Kowloon Tong is suitable for developing low-density buildings. After careful consideration, Lin Haoran felt that the land in Kwai Chung had more development advantages.

The advantages of Kwai Chung are obvious. Since the freight terminal was developed to Kwai Chung in the 60s, the flow of people there has increased. In addition, Kwai Chung is also a famous industrial development zone in Hong Kong.

Therefore, there are a large number of people employed in Kwai Chung. As of now, the properties in Kwai Chung are also very easy to sell, and there are many people with urgent needs.

The housing prices in the city center are still too expensive for many ordinary citizens.

Kwai Chung, located next to the centre of Kowloon and with relatively low housing prices, happens to be the target area for many middle-class people.

It can be said that if Wan'an Group takes over this piece of land in Kwai Chung, there will be no trouble selling the commercial housing after it is built!
Although the geographical location is much worse than that of the project in North Point, the unit price of the land is relatively much lower.

The starting price for the land in Kwai Chung is HK$1000 million.

"Mr. Yang, if we want to bid for this piece of land in Kwai Chung, how much money would it cost?" Lin Haoran asked.

"According to past experience, the transaction price will often double the starting price, depending on how many real estate developers are bidding and how strong they are. All these factors are uncertain," Yang Mingyi replied.

Double it? That is HK$20 million. It is really good to get this piece of land which is twice as big as the one in North Point.

Although the housing prices are destined not to be as high as those in North Point, its advantages are also obvious. The scale is larger and the profit ratio is actually almost the same.

"If we take over this piece of land, how much profit will we make?" Lin Haoran continued to ask.

"Based on the scale of this land, we can complete the construction in three to four years. As for how much profit we can make, it depends on whether we wait until the construction is completed before selling it, or start selling the pre-sale properties after we get the land and the design drawings. The profit difference between the two is very different.

In addition, the land cost is only a part of the real estate development cost, accounting for approximately 40% to 60%. That is to say, the subsequent construction cost will need to be doubled. If the transaction price of the land is million Hong Kong dollars, then the final cost of developing the land will be to million Hong Kong dollars.

Although selling pre-sale properties can recoup costs faster, because the price needs to be discounted to make it attractive, the profit may be around 30%, which is equivalent to hard-earned money. In the end, we invested a total of HK$40 to 50 million, and the profit may be more than HK$10 million.

However, if we plan to sell the house after it is completed, there are many uncertainties. We don’t know whether the property prices in Hong Kong will have increased when it is completed in two or three years, or whether a property crisis will occur in the middle of the process. If we calculate based on the increase from last year to this year, in three years, our profit will at least double the amount we invested, so it will not be a problem at all.

Therefore, because we are currently in the midst of an oil crisis, I cannot judge what the future situation will be like. If you want to be conservative, the best way is to start drawing up designs, advertising, and selling pre-sale properties immediately after acquiring the land to recover costs as soon as possible. In this way, we will not have the possibility of making a loss.

If a real estate crisis breaks out in one or two years, and house prices fall sharply, and our funds are borrowed and we have to repay the loan when it matures, plus the cost of the loan interest, then our project may not only fail to make money, but may even lose money. "Yang Mingyi talked about several possibilities, allowing the boss Lin Haoran to have a more intuitive understanding of the matter.

Lin Haoran nodded, he had made a decision.

According to his understanding of the history of Hong Kong's real estate crisis, the peak of the crisis was between the second half of 1982 and 1983, and this time the crisis began to show signs of decline in the second half of 1981. Now it is February 1979, which means that there are only two and a half years left before the real estate market shows signs of decline.

The time was very short, so short that the real estate crisis there broke out before a community was fully developed.

However, who says that to make money in the real estate industry you have to build houses?
Since house prices will skyrocket in the next two years, land prices will naturally skyrocket as well, and the increase in land prices will only be more than that of house prices.

Then it would be enough for me to just hoard land. Maybe in two years, I can double the money when I sell the land.

As for earning hard-earned money from selling pre-sale properties?

Lin Haoran didn't have this idea. Although he could recover his costs quickly, the profit was too low.

(End of this chapter)