Original Paper Research on the Transformation of Real Estate Enterprises‟ Asset-light Operation Mode—Take Vanke as an Example

Chinese the real estate industry has experienced more than 20 years of prosperity. The traditional operating model has brought huge profits to real estate companies under the specific economic environment and reform dividends. However, in the context of the continuous upgrade of macro-control in the real estate industry, real estate companies have narrowed their financing channels, and the pressure on funds has generally increased. They are facing an urgent need to expand financing channels, reduce financing costs, and maintain stable cash flow. In this context, it is increasingly important for real estate companies to transform their asset-light operation model. Therefore, this article will analyze the concept of light assets and the characteristics of light asset operation models, and take Vanke as an example to analyze the changes in Vanke’s financial performance before and after the transformation, and put forward relevant suggestions to provide references for real estate companies to transform asset-light operation mode.

system to improve the productivity of labor. The reasons are as follows: first, workers can focus on a specific task through division of labor, which increases the repetition of work in the focus field and improves the proficiency of the work. Second, the division of labor saves the time of switching between different work areas and increases economic benefits. Third, while improving their working proficiency, workers are more likely to improve their working methods and improve their production efficiency. Based on the theory of division of labor, asset-light operation mode enables enterprises to further subdivide the selection range of the industrial chain, focus only on the important links of the whole industrial chain, control the process, and reduce their capital input.
Strategic management expert Michael Porter points out through the analysis model of industrial value chain that different links in the industrial chain contain different value increment space. By accurately controlling key links in the industrial chain, enterprises on other links in the same chain can obtain excess profits or reduce investment. In other words, enterprises can gain competitive advantage through efficient allocation of resources.
Mr. Shi Zhenrong, founder of Acer Computer in Taiwan, pointed out through the "smile curve" theory that the research and development link in the upstream of the industrial chain and the marketing link in the downstream have higher added value, while the assembly link and the manufacturing link belong to the labor-intensive or capital-intensive production mode. Due to the adoption of programmed operations and fierce competition, the profit space of the production link is squeezed, so the added value line of the industrial chain is a u-shaped curve with high ends and low middle, so it is called "smile curve". Therefore, through division of labor, enterprises can take charge of the core links with high added value and outsource the links with low added value, so as to obtain more benefits with less input. The theory of "smile curve" further expounds the rationality and effectiveness of asset-light operation mode.

Land Cost Pressure
Since the total amount of land reserves is fixed and the state owns the ownership of land, enterprises can only passively participate in the sale of land. Due to market demand, the market price of land in large and medium-sized cities is getting higher and higher, so real estate enterprises have to purchase land at a high price, or even get land at the price of "land king". It can be seen from Table 1 that the land purchase cost of Chinese real estate enterprises keeps rising from 2009 to 2019. The land purchase area is relatively stable and fluctuates within a certain range, and the two are in a reverse comparison relationship. The reduction of land investment by real estate enterprises is mainly due to the following two reasons: first, the soaring land price and the tight capital chain make it difficult for real estate enterprises to achieve the purpose of enterprise expansion by investing in land; second, large and medium-sized enterprises in the real estate industry have successively transformed their asset-light mode and gradually changed their operation mode. In order to stabilize the real estate market and reduce the economic bubble, the government has introduced a series of policies to stop the rising of housing prices. Therefore, the sluggish sales performance and high costs have severely squeezed the interests of real estate enterprises, facing business difficulties. www.scholink.org/ojs/index.php/jbtp Journal of Business Theory and Practice Vol. 8, No. 4, 2020 60 Published by SCHOLINK INC.

Inventory Backlog
With the continuous upsurge of the real estate industry, the government has increased macro-policy control on the real estate industry, and the rigid demand of consumers for housing shows a weak trend, so the real estate market has gradually turned into an oversupply. According to the Blue Book on Social Over the next four years, the area available for sale fell, easing the inventory pressure. In the traditional operation mode of real estate enterprises, the investment capital is relatively high in the early stage of the project. In addition, due to the stagnant market and excessive overstocked inventory, the real estate capital circulation is not smooth. In order to maintain the scale expansion and realize the continuous circulation of capital in the project process to achieve the capital appreciation, loans are needed constantly. Therefore, many large and medium-sized real estate enterprises began to transform the asset-light operation mode to alleviate the current difficulties.

Tax Burden
Tax revenue is the main means for the country to control the economy from the macro level. Faced with an investment boom in China"s real estate market, the government has used tax revenue to adjust the real estate industry for several rounds. The tax burden of real estate is much higher than that of other industries. China"s real estate enterprises involve more than ten kinds of taxes, such as deed tax, stamp duty, land value added tax, value-added tax, enterprise income tax, urban land use tax, real estate tax, etc. The real estate industry bears not only a lot of taxes, but also a high amount of taxes.
According to statistics from the Shanghai Stock Exchange, among the 23 first-class industries in China, the comprehensive tax burden of the real estate industry reached 15 percent, ranking the top three in the industry, three times that of the construction industry and five times that of some service industries.

The Asset-light Operation Mode of the Real Estate Industry
The asset-light operation mode of real estate mainly refers to the professional division of labor and the lightness of assets. Companies in the industrial chain complete the stages of investment, development, planning, design, construction, sales and later property management of real estate development respectively. The public is the main source of funds, and the rest of the funds are from banks. Different from the traditional model, the asset-light model pays more attention to the increment of enterprise value brought by the operation process in the real estate development, and no longer takes owning land assets as the core. There are four main ways for real estate enterprises to transform the asset-light operation mode: sale and leaseback, real estate trust and investment fund, commercial trust and cooperative development. There are four ways for real estate to be asset-light.

Small Stock Trading Development Mode
The specific operation of "small stock operation" of Vanke is as follows: Vanke takes only a small share and controls the whole process of the project. Generally speaking, the proportion of Vanke"s shares is about 10%-50%, and the specific proportion varies according to the different proportions of the project. Less capital input not only reduces Vanke"s financing pressure, but also enhances its capital liquidity. At the same time. By providing professional services and obtaining management fees, Vanke can avoid the adverse impact caused by economic fluctuations and maintain the stability of its cash flow. It can be said that the mode of "small stock trading" brings a new round of profit growth for Vanke. The transformation of Vanke into a "small stock operation" mode will bring vanke the next profit growth point.
The partners of small stock trading can be divided into project holders and capital holders. As the partner is the holder of the project, Vanke holds a small proportion of shares and has little capital investment, so it is responsible for the open operation of the project. For the partner as the capital holder, the cooperative project is generally vanke"s own project. Vanke no longer controls the project by introducing external funds, and then vanke will lead the development and operation of the project.
Vanke has advantages that its partners lack, such as strict quality control, mature manufacturing system, excellent design ability and good credit resources. The partner chooses Vanke to take charge of the operation, and Vanke invests a small amount of money into the project. The "small cap" model creates a larger operation with the same asset size. Since Vanke does not hold a controlling stake, its profits in income distribution are mainly based on brand usage fees, planning and design fees, management technology fees, financing fees and other service fees, and more diversified income can be obtained through less capital investment.

Business Partnership System
The asset-light operation mode attaches great importance to human capital. At the same time of implementing the "small stock operation", Vanke also launched the "business partner" system, that is, the employee co-investment system. The employee co-investment system is a supplementary measure to the model of "small stock trading". Vanke"s business partner system is divided into the following two levels.

The Overall Level of the Company-shareholding Plan
Based on the characteristics of business partners, partners need to achieve revenue sharing, risk sharing, achievement co-creation. So a partnership is the best way to do it. The shareholding objects can be divided into the following three categories: (1)  There are also the following differences in shareholding according to the classification of employees: There is a limit on the shareholding of vanke group or local executives, which can avoid potential risks caused by stock price fluctuations caused by non-core employees. There is also a lower limit for executive shareholding, which effectively binds the interests of senior executives and the development shareholding plan, before the repayment of financing costs and return to the company, the bonuses of economic profits managed by the company will not be redeemed to individuals and the partners will not receive bonuses if they have short-sighted behaviors before the redemption, which to some extent avoids the short-sighted behaviors of the partners. The shareholding plan helps Vanke"s executives and core employees to choose the most effective development mode when introducing the asset-light mode, which is considered from the long-term perspective beneficial to the enterprise.

Project Level-project Co-investment and Event Partnership
When Vanke introduces the asset-light mode, it should not only pay attention to the management and core employees, but also the employees at the project level. From April 1, 2014, Vanke began to implement the project co-investment system at the project level, and let the project employees participate in the project with Vanke"s investment. Through the mechanism of interest binding, it can avoid the blind increase of land reserve at the project level, and promote Vanke to gradually transform from the all-asset-heavy mode to the asset-light mode. This not only stimulates the initiative of employees to improve efficiency, but also guides them to alleviate the operational limitations brought by the traditional asset model.
The project co-investment system requires that the management and project manager of the first-line company where the project is located must co-invest. The co-investment is restricted by the directors, supervisors and executives of the company, and other employees can participate voluntarily. The initial share of follow-on investment shall not exceed 5% of the capital peak. At the same time, vanke"s organization shall receive additional grants and follow up investments, and the total amount shall not exceed 5% of the peak capital. Front-line follow up investment employees of the project may choose to receive additional grants within 18 months. The specific process is as follows: First, Vanke makes public the follow-investment project, which not only introduces the basic information of the project but also includes the expected investment data. Secondly, before the project starts or during the construction period, compulsory and voluntary co-investors are registered for subscription within the group system. Then, after the subscription is completed, the follow-through will make the payment.
Finally, the co-investor will bear the corresponding profits and risks of the whole project operation after the completion of the project and sales. By the end of 2019, the group has introduced a total of 865 projects under the co-investment mechanism. The 2019 annual report shows that among the newly acquired projects, the amount of follow-through subscription is 4.157 billion yuan, accounting for 1.87% of the peak capital of the follow-through projects and 2.48% of the peak equity capital of Vanke.

Diversified Asset-light Business
Vanke is paying more and more attention to the development of new businesses. Yu Liang, its President, has floated the idea of shoring up Vanke through new businesses. Based on the development trend of vanke in recent years, vanke has no longer specialized in residential property and has begun to expand its business scope. At present, Vanke has begun to layout property, old-age care, long-rented apartments, commercial and other fields, and correspondingly adopted "brand output", "small stock operation" and other asset-light operation methods. Vanke hopes to gradually transform from a real estate project developer to an urban supporting service provider, and constantly march into the stock housing market. In the 2017 annual Report, Vanke upgraded its strategic positioning to "service provider for urban and rural construction and living".
Through "brand output", Vanke has rapidly expanded the layout of property, pension and other fields.
In terms of property, Vanke launched Rui Service 3.0, and continues to improve the quality of Rui service, creating rui alliance of integrated operation. By August 2019, Vanke"s Rui Alliance has covered more than 2,000 projects in 65 cities. In addition, Vanke also completed the division of the

Asset Management Capability
The operation situation and asset management ability of enterprise assets can be analyzed through operation ability index. Enterprises can not only understand that in a complete accounting cycle or production cycle, capital from the input, purchase, consumption and other processes, the final judgment of asset appreciation. Investors can also judge whether they are getting a satisfactory return. Through the annual report of Vanke from 2011 to 2019, the main indicators of vanke"s operating capacity in the past 9 years are sorted out, and the performance of operating capacity reflected in the period before and after the transition to asset-light operation mode is analyzed. The change trend of inventory turnover rate and accounts receivable turnover rate is relatively consistent. Since the implementation of asset-light strategy transformation in 2013, it has gradually picked up, showing a good development momentum. In terms of specific turnover efficiency, the inventory turnover rate declined in 2011 under the influence of macro-control. The increase of inventory turnover rate in 2012 is on the one hand due to the accelerated sales growth driven by the recovery of industry prosperity, and on the other hand due to the slowdown of scale expansion in 2011, the inventory accumulation rate has decreased. 2013 is still in the initial stage of the asset-light model, still relying on sales to relieve the inventory pressure, so the turnover rate rose. However, after 2014, the overall sales growth was blocked, while the inventory actually declined, indicating the improvement effect of the asset-light operation mode on the inventory turnover rate. Since inventories account for a large proportion of both current assets and total assets, the asset-light transformation model alleviates inventory overstocking and reduces the proportion. The changing trend of current asset turnover and total asset turnover reflects the improvement of vanke"s overall operating capacity driven by inventory.

Profitability
Profitability refers to the ability to increase the assets of an enterprise, which reflects the business performance of the enterprise in a certain period, and also indicates the ability to sustain the future development of the enterprise. If an enterprise wants to achieve sustained profitability, it must constantly improve its profitability and increase the value of the enterprise. Profitability increment ability mainly through the enterprise"s sales net interest rate, return on assets, return on equity and other indicators to measure. Due to the majority of projects in the traditional operation mode, Although Vanke has expanded its scale after the transformation to the asset-light mode, it has not reversed the predicament that the asset-heavy mode is restricted due to the industry adjustment. Although Vanke"s sales revenue increased year by year, the growth rate decreased year by year. Another major reason for the inventory backlog is the slowing growth of traditional operations and sales. In order to reduce the inventory pressure as soon as possible, Vanke adopted various promotional methods, so that the gross profit margin of sales decreased year by year, reaching as low as 29.41% in 2016. Since vanke"s asset-light mode projects account for a relatively small proportion, the decline in profits from the traditional operating mode has affected the year-on-year decline in net interest rate. After the transition to asset-light mode in 2013, the decline of net profit margin on sales relative to gross profit margin slowed down somewhat. Although the transformation of Vanke into asset-light mode is relatively light, the downward trend of profitability plays a restraining role.
The roe of Chinese real estate industry has been declining in recent years, which is mainly related to

Debt paying Ability
After 2014, the current ratio of Vanke continues to decline, indicating that the ability of enterprises to repay debts by relying on current assets is weakened. On the contrary, the quick ratio shows that after the transformation, the index as a whole is rising, which indicates that the current assets with strong liquidity are gradually improving their ability to repay debts. Taken together, the solvency of receivables and inventories is declining. Before and after the transformation, the cash ratio of enterprises shows a reversal difference of decline and rise, indicating that after the transformation of asset-light operation mode, the cash ratio of enterprises shows a trend of growth for many years, indicating that the disposable cash of enterprises is increasing. After Vanke implemented the asset-light operation mode, the asset-liability ratio has been rising, so it can be inferred that the enterprise still adopts the capital structure with high liabilities. According to the information disclosed by enterprises, the growth rate of liabilities is much faster than that of assets due to the change of business mode.According to the index of interest guarantee multiple, after the asset-light operation mode was implemented in 2014, the interest guarantee multiple of enterprises realized a high growth and then dropped sharply, mainly after 2016, when the financing scale of enterprises was constantly expanding, leading to an obvious increase in interest expense. In general, vanke"s capital structure is highly indebted, so its financial risk is high, which deserves attention.

Development Prospect
Through the growth rate of enterprise"s operating income, it can be seen whether the enterprise"s sales growth is fast. According to the data analysis in the figure

Conclusion
As the pillar industry in China, the real estate industry is an indispensable part of Chinese economic development. With the change of macro environment, the traditional operation mode of Chinese real estate enterprises has been unable to meet the demand of the market, so it is urgent for them to change their operation mode. The asset-light operation mode is a very beneficial attempt in China"s real estate industry. This paper analyzes the motivation of the asset-light transformation, summarizes the applicability of the asset-light operation mode, and analyzes the operation effect of the asset-light operation mode through the financial indicators of Vanke Group. This paper draws the following conclusions: First, with the change of economic situation, Chinese real estate market is facing many challenges, such as the change of market supply and demand, the increase of land cost, the increase of tax burden and financing difficulties. When the real estate market is depressed, the housing price goes down and the capital cost goes up, the return brought by asset appreciation is no longer enough to make up for the capital cost occupied by assets, so it is urgent for enterprises to change their operation mode. However, asset-light operation mode is more suitable for Chinese enterprises under the current background because it introduces partners to share capital input and operational risks, and enterprises rely more on value-added services to obtain income, which is less subject to capital cost and market fluctuation.
Second, the asset-light operation mode reduces the capital demand of the project, alleviates the financing pressure of enterprises, and shares the risks brought by the project for enterprises by introducing capital input from partners. At the same time, it can also help enterprises to broaden financing channels, build enterprise financing platform, solve the capital needs of enterprises, reduce financing costs. In addition, real estate enterprises under the asset-light operation mode will change their profit model and start to rely on providing value-added services to obtain profits. While relying on the share of earnings, it can also charge management fees and extract excess earnings. Enterprises can obtain greater returns with less investment and improve the return on assets of enterprises. At the same time, in the face of the slowing down of the appreciation rate of domestic real estate, the increase of financing costs, the previous value-added income is faced with a greater risk, and the expense profit model makes enterprises in a more stable state of investment return, which is conducive to the long-term healthy development of enterprises.
Third, in the fierce market competition, any enterprise wants to obtain high returns at low costs.
Asset-light operation enterprises must rely on their own core capabilities to occupy the high value-added links of the value chain. This requires a strong core skill set. Take Vanke, the case company in this paper, for example, with its advantages in material procurement, project management, professional design, property operation, brand reputation and other aspects, it was able to gradually transform to be asset-light and earn large project profits with low capital investment.

Implication
In view of the introduction of asset-light operation mode, this paper proposes the following Suggestions for real estate enterprises: Asset-light operation mode is not simply to introduce partners and broaden financing platforms, so as to obtain excess returns with small input. In addition, the real estate enterprises under the asset-light mode need to strengthen their own capacity building. The real estate enterprises under the asset-light mode have an obvious characteristic-specialization. They can subcontract different links to excellent partners through division of labor. It will be easier for different enterprises to participate in the project with their own expertise, and the competition among enterprises will be more intense. Therefore, under the new market environment, enterprises must strengthen the construction of their own capacity, strengthen the construction of soft and hard power such as design planning, building construction and knowledge capital. The real estate enterprises under the asset-light mode can only take part in the more intense market competition with one or several excellent core knowledge and skills. At the same time, under the asset-light mode, enterprises are no longer responsible for all links of project development, but allocate different links to different professionals, and there are many different enterprises operating together in the whole value chain. This requires enterprises to have a certain degree of resource integration and cross-organizational management capabilities, to be able to properly distribute the interests of all parties, organize their superior resources, and avoid the impact of different interest demands, different corporate cultures, short-term rent-seeking behaviors of all parties on the normal operation of the value chain. In addition, in the face of the current enterprise sustained high capital costs, enterprises" asset-light mode needs to adjust its capital structure, reduce its scope of business, optimize the allocation of resources, eliminate project assets with low profits or even losses.
Concentrate the limited capital on the advantageous areas of the enterprise, further improve the capital operation ability, strengthen the capital use efficiency, and speed up the assets turnover.