CBRE report validates UK’s Asset Management Capacity for REITs
According to Ucommune’s press release on Aug. 12, 2021, CBRE Consulting China (“CBRE Consulting”) recently released a report titled “Ucommune Rental Evaluation and Joint Consultancy Services”. This report conducted in-depth analyses on both financial and operational performances of the Company’s asset-light business model, across metrics including ROI, occupancy rate, and rental pricing.
This report encompasses (1) the overview of UK’s business development, (2) the analysis of the operation status of UK’s light asset projects, (3) case analyses on UK’s representative projects, (4) the value offered by Ucommune, (5) REITs market research, and (6) Ucommune REITs Property Screening Criteria. Based on the report findings, CBRE Consulting has concluded that with Ucommune’s excellent asset management capabilities under the asset-light business model, Ucommune is able to bring tremendous value to its landlord partners, and further apply those capabilities to establish real estate investment trusts (“REITs”) as an asset manager in the future.
Demonstrated Outperformance on 3 REIT KIPs
Through the evaluations of UK’s representative projects across 10 cities, CBRE’s report validated the Company’s REITs asset management capability by the following three KPIs:
Return on investment (ROI) maintained at over 15%
The Company is able to generate a high ROI for majority of its landlord clients, at an average return of 15.4% in Tier-1 and new Tier-1 cities, 16% in Tier-2 cities in China, and 15.7% for Ucommune’s offline agile office space services.
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Occupancy rates stabilized at higher than 83%
Notwithstanding the disruption on enterprise workspace brought about by the pandemic outbreak in 2020, Ucommune’s projects remained stable at an average occupancy rate of above 83%. Following the economy reopening, the overall occupancy rates for office buildings in China had rebounded from their recent lows, to 80.8% in Shanghai and 82.5% in Beijing in the first quarter of 2021, compared to an average of 83.6% from surveyed Ucommune’s projects. Overall, occupancy rates for most of the Company’s projects ranged between 80%-95% according to the Company’s press release.
Unit rental price more than double the average level
The report shows that for majority of Ucommune’s projects, the Company was able to double unit rental price than the historical average rental rate, and in some cases even more than double. Take Shenzhen Design Innovation Workshop project for example, Ucommune was able to achieve a unit rental price of RMB6.97 per square meter per day, grew nearly four times from the project’s original price of merely RMB2.00.
In conclusion, Ucommune’s agile office space management has proved able to enhance the value of office buildings, which in turn generates higher rents, higher occupancy rates and higher ROI for the landlords. Empowered by its comprehensive services and superior project and asset management skills, UK can bring compelling value proposition to landlords and partners, meanwhile laying the foundation for future development of its own REIT business down the road.
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REIT‘s Bright Spot in China
China‘s first public REIT was oversubscribed when listed on the exchange back in June, 2021. REIT products not only enable real estate developers to participate in the asset-light business model, but also allow the asset managers to utilize standard operating procedures in managing and replicating asset-light business model.
The ability of REIT issuers to manage the underlying assets is an essential qualifying factor. As stated in the CBRE Report, Ucommune’s strong track records in enhancing asset value and effective management verified by the aforementioned KPIs have qualified it as an asset manager for REITs in an uncertain economy environment.
Roadmap to REIT Issuance Central to Business Growth
With Ucommune’s strong asset management capabilities, the issuance of REITs is evidently becoming central to the Company’s growth strategy going forward.
Built on top of its proven asset management capability, Ucommune is committed to creating an integrated asset management business spanning the value chain including investment origination, project financing, property management, and exits. The Company has the opportunity to utilize its asset management advantages for extended real estate services, especially into the real estate financing business enabled by scaled asset-light business model. Combining the Company’s strong operating capabilities and asset-light model featuring flexible and cost-efficient office space solutions, landlords will then have more options to counteract systemic financial risk.
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