Spending 500 million yuan to purchase the office space in the World Financial Center, he set his sights on its "great potential for appreciation"
The "corporate stock king" Liu Yiqian bought the 69th and 70th floors of the World Financial Center at 82,000 yuan per square meter
"The 69th and 70th floors of the World Financial Center have been purchased by Liu Yiqian!"
82,000 yuan/square meter
Lower unit price than Tomson's
When it comes to Liu Yiqian, a veteran who once made waves in the Shanghai stock market, almost everyone in the financial industry knows him. In recent years, he has devoted himself to the collectibles market, where he has also achieved remarkable success.
"I learned about this news from an announcement by a listed company. After knowing that the World Financial Center was being sold at more than 80,000 yuan per unit, I thought it was relatively cheap. Later, I found a large intermediary company to negotiate this deal together." Liu Yiqian frankly admitted.
The "listed company" referred to by Liu Yiqian is precisely the first buyer after the public sale announcement of the World Financial Center - Tomson Group. According to the announcement in February, Tomson Group acquired the 72nd floor office property of the World Financial Center, with a construction area of 3,221.87 square meters, at a total acquisition price of 2.67 billion yuan, equivalent to a unit price of nearly 83,000 yuan per square meter.
Tomson's purchase of the entire floor of the World Financial Center at a unit price of nearly 83,000 yuan per square meter was already considered a bargain, but the two floors acquired by Liu Yiqian were even cheaper. According to insiders, the final unit price agreed upon by Liu Yiqian was 82,000 yuan per square meter.
Moreover, in terms of personnel in the company, Liu Yiqian currently serves as the chairman of Guohua Life Insurance and is also the legal representative of Guohua Life Insurance. Although Liu Yiqian resigned from the positions of chairman and director of Tianmao Group in March this year due to health reasons, his actual influence on Taiping Insurance and Guohua Life Insurance has not changed.
Great potential for appreciation
"Missed opportunity will never come again"
During his time as chairman of Tianmao Group, Liu Yiqian always played the role of financial director, carrying out a series of capital operations. As the chairman of Guohua Life Insurance, this transaction with the World Financial Center naturally placed him in the role of investment director. Known for his sharp instincts in the stock market and dubbed the "capital cheetah," Liu Yiqian also demonstrated a keen sense and accurate judgment in fixed asset investments.
Liu Yiqian discovered the news of the public sale of the World Financial Center himself and actively sought intermediaries to participate in the transaction matters. While seizing the opportunity with sensitivity, his judgment on value was also quite reasonable.
However, the judgment of "paying attention to the appreciation prospects of the property" seems more like that of an investor. However, when the World Financial Center was publicly sold, the developer Mori Building had clear requirements: it must be a self-use buyer.
Taking the purchase fact of Tomson as an example, one of the clauses in the sales agreement between Mori Building and Tomson Group stipulated that the office property unit purchased by Tomson shall not be sold or transferred within seven years from the issuance date of the "Buyer's Small Property Certificate." Moreover, any subsequent sale of the property by Tomson would require the approval of Mori Building.
Preparing "impressive" assets for listing
Currently, both insurance companies are located in Pudong. The headquarters of Guohua Life Insurance is located in the Jinmao Tower adjacent to the World Financial Center. Taiping Auto Insurance has two office locations in Shanghai. Its headquarters is located in the China Development Bank Tower near Lujiazui, while the Shanghai branch is located in Huaihai East Road, Huangpu District.
Taiping Automobile Insurance Co., Ltd. was established in 2004 with a registered capital of 630 million yuan. It is the first nationwide automobile insurance company in China and has set up branches in Shanghai, Beijing, Zhejiang, Jiangsu, Sichuan, Hubei, Guangdong, Hebei, Shandong, Chongqing, Tianjin, and other places. It is currently in a high-speed development stage during its entrepreneurial growth period.
Another insurance company, Guohua Life Insurance, was established in 2007 with a registered capital of 1 billion yuan. Its business scope includes various types of personal insurance businesses such as life insurance, health insurance, and accidental injury insurance. Its operating regions are also widely covered, including Shanghai, Beijing, Tianjin, Henan, Hebei, Zhejiang, Shandong, Guangdong, Jiangsu, Hubei, and other places.
The current tenants of the World Financial Center include international top-tier financial institutions such as Japan's Sumitomo Mitsui Banking Corporation, Mizuho Corporate Bank, BNP Paribas, Commerzbank, Korea Development Bank, and Ernst & Young, as well as domestic leading enterprises such as Cathay Fund Management Co., Ltd. and Xinhuadu Industrial Group Co., Ltd.
Considering the current status of Taiping Auto Insurance and Guohua Life Insurance, the properties they currently occupy, namely the China Development Bank Tower and Jinmao Tower, are all rent-only properties. This transaction with the World Financial Center finally allows both companies to own fixed assets in the form of office buildings, which can be used for their own purposes and also serve as quality assets for the companies.
In fact, one of these two companies, Taiping Auto Insurance, is currently at a critical stage, preparing for its IPO. As early as September 2009, when the domestic capital market IPO gate was just reopened after being closed for nearly a year, Taiping Auto Insurance had already begun preparing for its IPO.
Founded in 2004, Taiping Auto Insurance was in a loss-making state during its business expansion phase until 2007 when it finally achieved a profit of over 10 million yuan and began to turn profitable. In 2008, its net profit was only 37.15 million yuan. By the end of 2009, it just met the condition of continuous profitability for three years required for an IPO and immediately embarked on its IPO journey. The tutoring period of Taiping Auto Insurance has ended, but due to being a financial enterprise, the approval process is slower. However, according to industry estimates, if everything goes smoothly, it could successfully go public next year.
Three years ago, purchasing a property in Tomson One has already yielded a profit of 8.18 million yuan
In fact, the halo of Liu Yiqian as the "King of Legal Shares" and a collector overshadows his achievements in the real estate field. He owns hundreds of properties in Shanghai, so many that he himself cannot remember the exact number. This includes a famous luxury residence, Tomson One. In 2008, he purchased an apartment with an area of 557 square meters in this complex for approximately 75.4 million RMB. Based on this calculation, the unit price of the property Liu Yiqian bought at Tomson One was around 135,300 yuan per square meter. Nearly three years later, the average price of Tomson One has now reached 150,000 yuan per square meter. If resold, Liu Yiqian could realize a cash-out profit of 8.18 million yuan.
Turning our attention back to the World Financial Center where Liu Yiqian made his latest move, the property he purchased belongs to commercial real estate. Under the current circumstances, commercial real estate is unaffected by housing market regulation policies, and in the long term, the outlook for commercial real estate is definitely positive. Geographically speaking, Shanghai's plan to build "two centers" - an international financial center and a shipping center - will deepen the city's internationalization and modernization. The location of the World Financial Center in the heart of Shanghai's financial hub, Lujiazui, will attract more domestic corporate headquarters and global enterprises in the future. As the tallest building in China and the third tallest in the world, its potential for appreciation is clear and bright.
As Liu Yiqian himself stated, he sees great potential for appreciation in this property. Missing this opportunity might mean losing out on such a good investment chance forever. Perhaps in a few years, the investment returns from the World Financial Center will once again validate his accurate investment judgment.
Increase in office supply in Lujiazui
Future vacancy rates may rise
Although the World Financial Center has completed transactions for five floors in a short period of time, according to information published on Real Estate Online, the sold portion accounts for less than 7% of the total salable portion. According to the disclosed sales information, the "total number of units" for the World Financial Center is 74, and after the completion of the first few deals, there are still 69 units remaining for sale. The entry of the World Financial Center into the market has an undeniable impact on Shanghai's entire commercial office market. From the initially launched total salable area of 309,399 square meters to the remaining salable area of 293,151 square meters, it clearly shows that the World Financial Center has significantly contributed to the increase in Shanghai's office supply. With the entry of the World Financial Center, the Shanghai office market has recently shown some "abnormalities." This is mainly reflected in the significant increase in the supply of office buildings in Shanghai, exceeding 400,000 square meters and approaching the peak level at the end of 2010; secondly, under the situation of increased supply, the rise in office rents is weak.
Since 2005, the Shanghai office market has entered a peak period of investment and construction, resulting in an increasing supply of office buildings. Data shows that the compound annual growth rates of investment in office buildings and new starts in Shanghai over the past five years have reached 17% and 4%, respectively, higher than the concurrent development of the residential market; during the period from 2007 to 2008, the annual growth rates of these two indicators reached 22% and 30%, respectively.
Zhongyuan Real Estate believes that due to the peak period of investment and construction in the Shanghai office market in previous years, according to the construction cycle of office buildings, the newly constructed office properties in the last two years will soon convert into effective market supply. Therefore, a situation of oversupply may occur, directly resulting in significant downward pressure on office rents, and the vacancy rate of buildings may gradually increase.
From the perspective of the office market in the Lujiazui area where the World Financial Center is located, the newly completed New Horizon International Finance Center and the under-construction Shanghai Tower, two Class A office buildings, will inevitably affect the rental conditions of the World Financial Center. This will necessarily slow down the rental growth in the area. The decision by the World Financial Center to sell off portions at this time is partly due to the developer's need to recover funds, but also avoids competition under the backdrop of a possible significant increase in supply in the future.