Top ten mainland builder China Fortune Land Development (CFLD) this month announced that it is welcoming three senior executives from Ping An Insurance to take leading roles at the developer, just three months after the insurer paid RMB 13.8 billion ($2 billion) to purchase 19.7 percent of CFLD.
That investment made Ping An, which had assets of RMB 6.5 trillion ($938 billion) at the end of 2017, the second largest shareholder in CFLD, as well as giving it rights to representation on the Beijing-based developer’s board.
At a meeting in the Hebei province city of Langfang last week, the first all-staff meeting since Ping An bought its stake in the developer, CFLD founder and CEO Wang Wenxue revealed that, armed with Ping An’s ample cash reserves, and some fresh leadership from the insurer, the company aims to join the ranks of China’s top three developers, and is ready to venture beyond its traditional specialty in building industrial townships.
Ping An Execs Take CFLD Roles
As part of the company’s new strategy announced this week, CFLD introduced three senior Ping An executives as taking key roles in its management team, two of whom are already members of the firm’s board of directors.
Ping An vice president Meng Sen, who was confirmed as a board director at a meeting on October 8th, was appointed as a vice chairman of CFLD, while Wang Wei, a Ping An managing director specialising in real estate private equity, will take on responsibilities for financing and fund-raising at the developer, after having been named to the board at the same October 8th session.
A third Ping An manager was also said to be joining CFLD with this executive set to focus on the developer’s expected ventures in senior housing, rental apartments and commercial property, all areas where Ping An has significant existing investments.
Ping An bought up its stake in CFLD in July, after the company’s share price had slid 50 percent since the beginning of the year. Ping An, China’s most valuable insurer by market capitalisation, paid RMB 13.8 billion ($2 billion) to purchase 19.7 percent of CFLD, adding to a 0.18 percent share that it already held and making it the second largest shareholder after China Fortune Land Development Holding who holds 42.7 percent of the company’s stock.
Market Slowdown Leads to New Strategy
At the Langfang event, Wang Xuewen said that due to recent changes in government policies and growing competition, China’s real estate market is under extreme pressure.
Facing this environment, Wang cited strong financing as the developer’s best weapon for survival. According to Wang, with Ping An now part of CFLD’s team, the company that reached RMB 153.8 billion in total sales in 2017 will not just seek to survive, but will aim to challenge industry titans Country Garden, Evergrande and Vanke to join the ranks of China’s top three developers.
Vanke achieved sales of RMB 523.9 billion in 2017 to rank third among China’s home builders, meaning that CFLD would need to more than triple its sales to displace its Shenzhen-based competitor.
To make way for the change in management, in an announcement filed with the Shanghai Exchange last month, China’s ninth largest developer by sales modified the company’s articles of association to increase the number of board member from eight to nine.
Under its new management, Wang said that CFLD will also adjust its business model, shifting away from its traditional focus on developing industrial townships that rely on sales of commodity housing around an industrial park, to pursuing new strategies, such as development of senior housing, healthcare facilities and rental apartments, as well as commercial projects.
Ping An Invested in Real Estate
Ping An’s CFLD initiative is the latest step in a series of large-scale real estate investments by the insurer over the past three years.
In 2015, Ping An Insurance invested HK$6.3 billion to buy new shares in Country Garden Holdings, China’s biggest developer by sales in 2017, at a time when the country’s developers were grappling with a shortage of both customers and funds caused by an earlier set of policy restrictions.
Then, ust over one year ago, Ping An Asset Management paid HK$1.9 billion ($240 million) to purchase 545 million new shares in Hong Kong-listed CIFI Holdings, making it the fourth largest shareholder in the Shanghai-based developer, ranking just behind three of the company’s founders.