Author | Zhou Zhiyu

Editor | Zhang Xiaoling

Ten years ago, Vanke announced that the Real Estate Industry had entered its second half, and Vanke Property became one of the earliest businesses pushed to market among its diversified operations.

In the words of Zhu Baoquan, the Chairman of Wanwu Cloud, at that time Vanke Property was also put on the stage under pressure, becoming the most important part of Vanke Group's new ten-year development plan that year.

However, at that time, Zhu Baoquan already had a grand goal for Vanke Property, aiming for a managed area of 0.6 billion square meters. At that time, its managed area was only at the level of ten million.

Now, that ambition has been realized; Wanwu Cloud can stand on its own. It has transformed from a company that only served Vanke Real Estate to a comprehensive service company with an annual revenue exceeding 30 billion.

Over the past decade in the Property Service Industry, Zhu Baoquan has gradually achieved his initial vision for Wanwu Cloud. He is also determined to use Technology to bring about a qualitative change in China's Property Service Industry over the next ten years.

Indeed, urban development has now shifted from the past large-scale construction of the 'incremental era' to the 'stock era' that requires meticulous cultivation. In this new period, it is clearly inappropriate to use traditional Property Service management thinking for Operation.

Zhu Baoquan believes that through the磨练 in marketization over the past decade and continuous exploration in Technology research and development, Wanwu Cloud can explore a path for the future of the Property Service Industry, further transitioning from Property Service management to Asset Management.

This path may not be easy and requires Wanwu Cloud to prove itself with actual performance growth and efficiency improvements. However, once successful, Property Service companies like Wanwu Cloud will open up broader imaginative spaces, further enhancing their Business capabilities, scale, and valuation. A new chapter in the second half of Real Estate will thus begin.

Transformation.

The decision to become independent ten years ago may have been somewhat coincidental, but there is no doubt that Wanwu Cloud today is vastly different from Vanke Property ten years ago.

Zhu Baoquan recalls that before Vanke Property entered the market, it had already found its benchmark symbol, First Service. From it, Vanke Property had seen that Property Service companies have more possibilities beyond residential properties. These possibilities are not limited to the types of properties but also pertain to what Property Service companies should become.

In summarizing the evolution of Wanwu Cloud over the past decade, Zhu Baoquan marked a series of important time nodes using the Space axis and Tech axis.

Horizontally, the space represents Wanwu Cloud's continuous enrichment of its management types. Through several important acquisitions such as Yaojiang Property, Wanwu Cloud's management scale in some regional markets can compete alongside local leading companies; leveraging the acquisition of DTZ, Wanwu Cloud has successfully expanded its capacity boundaries in commercial properties.

On December 11, the new brand Dantian Property under Wanwuyun officially came to the forefront, further expanding Wanwuyun's reach into the more specialized fields of campus and hospital sectors.

If it is merely a spatial expansion, each type of business remains an independent entity and cannot realize the "1+1>2" effect. Wanwuyun aims to create an ecosystem in terms of space.

Zhu Baoquan believes that the labor-intensive nature of Property Services does not exhibit nationwide economies of scale, which makes it impossible to create genuine efficiency between individuals.

True efficiency derives from the scale efficiency of a "local area network," that is, establishing a service circle that can be reached within 20-30 minutes in a city area with a 3-kilometer radius. Consequently, Wanwuyun proposed the Butterfly City Global Strategy in 2021.

From a financial perspective, the effects of the Butterfly City are evident. In the first half of this year, the gross margin of residential Property Services from Wanwuyun's Butterfly City transformation improved by 0.8 percentage points.

The vertical technology is another dimension through which Wanwuyun achieves efficiency improvements. Since 2012, Wanwuyun has allocated 1%-2% of its revenue annually to Technology.

Over the past years, numerous results have been achieved, ranging from the remote self-service machine "Pineapple No.1", access control equipment management system "Black Cat No.2", employee scheduling system "Flying Pigeon", to the latest edge computing Server "Lingshi". The ongoing innovation in Software and Hardware is a manifestation of Wanwuyun's aim to change the deeply rooted labor-intensive characteristics of the Property Services Industry.

Zhu Baoquan pointed out that traditional Property Management refers to the ability of people managing people. He humorously mentioned that when he first started in Property Management, he thought he could manage security personnel, but later realized he could only manage the general manager, while only the security supervisor could manage the security staff. This is also the greatest issue in the Property Services Industry, as the stronger the professional competence built, the poorer the ability to perform other tasks.

After the continuous improvement of Technology capabilities, property management can also transition from managing people to managing things. Frontline employees are no longer limited to single roles such as customer service and security personnel, but can also try to transition to more positions. This leads to what Zhu Baoquan said about "employees being able to run."

Wanwuyun has also transformed accordingly, already forming a comprehensive service company that includes Residential Property, Commercial Property, City Services, Asset Services, Enterprise Services, and Technology Services.

Evolution

A decade has passed, and Wanwuyun has been completely renewed. However, the significant changes in the industry still require it to continue evolving in order to escape the current valuation narrative.

In the past decade, the property industry has rapidly undergone a cycle of baptism. From the spin-off and independent development of property companies, to their hot phase fueled by capital, and then to the past three years where some companies in the industry were severely impacted by the real estate development business.

Property stocks are no longer the darlings of the Capital Markets, enjoying valuation premiums.

In the past, leading enterprises used stories of scale growth and business expansion to achieve dynamic PE ratios exceeding 100 times. Now, including CHINA RES MIXC, leading enterprises have PE ratios of only about 10-17 times, and the market gives them valuations akin to basic infrastructure services. And since First Service went public, its PE ratio has been above 50 times for most of the time.

The valuation difference stems from the fact that despite the significant slowdown in the growth rate of accounts receivable for Chinese property companies compared to the previous two years, with risks gradually being cleared, investors remain skeptical about the impairment of accounts receivable from related parties of property companies and the pressure on short-term profits.mergers and acquisitions.The rapid increase in scale has led some "overweight" property companies to face issues such as goodwill impairment, declining reputations, and falling profits.

Looking further ahead, in the current narrative, China's property industry has swiftly entered a stock phase from a period of high growth due to changes in the real estate market. Property companies will engage in more intense competition for existing residential projects, as the improvements in management and service capabilities brought by short-term high capital investment are difficult to sustain, while increasing operational costs further impact profits.

To break this deadlock, it is necessary to return to whether scale can grow sustainably and whether new growth points and business breakthroughs can be found beyond traditional property management services.

Zhu Baoquan is well aware of investors' concerns.

In terms of scale growth, property companies still have multiple paths to follow. From the global development trajectory of all light-asset companies, mergers and acquisitions are an inevitable path for scaling up. What the property industry needs to do is real mergers and acquisitions, able to delve into the acquired companies on cultural, IT system, or procurement framework levels to achieve a genuine merger.

Additionally, there is a need to tap into lower-tier markets and open up larger markets. On December 11, Wanwu Cloud announced the launch of a new product called "Watchlist," which, through a thorough review of service spaces and work objects within the community, derived 508 service SLAs (service level agreements) from Vanke Property, including 158 mandatory services and 350 optional services. The optional services can be selected in terms of items and frequency, providing more flexible pricing options.

Zou Ming, market management partner of Vanke Property, stated that in the past, property service prices were set through a "per capita" pricing model, which did not actually have a standardized pricing system for services. After further elaborating service items and frequency, Vanke Property sets a "bottom line" for services, allowing owners to determine the "top line" for services based on their needs, which will be a supply-side reform in the property industry.

Zou Ming predicts that if Vanke Property's property fees can drop below 2 yuan in the market, the business opportunities will increase by 110%.

Wangwuyun is also enhancing efficiency and achieving differentiated service delivery by utilizing the product portfolio and management capabilities developed through long-term technological investment, adopting a "human + machine + remote" approach.

Wangwuyun has also conducted deeper attempts with "Butterfly City + Community Commerce." This capability allows Wangwuyun not only to recover accounts receivable from Vanke Real Estate but also to identify community businesses within its capacity range to transform business operation services.

This is also a concrete reflection of property management companies' capabilities in the era of existing stock, which is to enhance the asset value of the community by transforming "community commerce at the doorstep."

Previously, Wangwuyun had attempted community transformations in existing residential projects in Nanjing and other places, which not only improved property collection rates, project profit margins, and owner satisfaction but also leveraged new project market acquisition. Moving forward, "Butterfly City + Community Commerce" can also become an important lever for Wangwuyun to acquire projects.

Zhu Baoquan also stated that "Assets" will be one of the key focuses of Wangwuyun's capabilities development in the next three years. Transitioning from property management to asset management extends to the upstream and downstream business chains, servicing property holders.

With China aiming to achieve carbon peaking by 2030, enterprises have higher demands in energy management. Over the past two years, Wangwuyun has also made significant achievements in energy management by integrating Internet of Things technology, utilizing smart energy consumption management and carbon emission monitoring.

Zhu Baoquan stated that Wangwuyun will transition to energy management, aiming to become a pioneer in energy conservation in the real estate sector within three years. At the same time, it will fully embrace AI to further realize the transformation from human management to task management.

The keywords "Assets, low carbon, AI" represent the next steps in the development of Wanwu Cloud, which reflect Zhu Baoquan's vision for the future of Property Service companies. By further extending two dimensions, space and technology, Property Service companies are gradually shedding their past labels, becoming platforms with Asset Management capabilities, and transforming physical spaces using Technology.

Perhaps this process is full of challenges, but this stunning transformation undoubtedly raises expectations. The Capital Markets can also reevaluate Wanwu Cloud and even Vanke, using a different valuation system to assess their value.