Chapter 124 - Opportunity to Rise Before the Real Estate Crisis
"Boss, if you want rapid development, it's actually very simple.
The main problem with Wan'an Group is the lack of sufficient funds, which has somewhat restricted our pace of expansion."
"I'll give an example: back in March 1975, Wan'an Group competed with several real estate companies for a piece of land in Wan Chai."
"At that time, we were determined to win that land because everyone recognized its value."
"We raised 50 million Hong Kong dollars, 30 million of which came from company cash, and the other 20 million were advanced by your father without taking out a single loan from the bank."
"In the end, that land's final transaction price reached 76 million Hong Kong dollars — far beyond the 50 million we had gathered."
"If at that time Wan'an Group had been more aggressive, bought the land first and then sought a bank loan, we could have stayed in the competition."
"Unfortunately, we gave up."
"The developer who eventually bought the land profited massively from it.
In just a year — with property prices rising significantly compared to 1975 — they earned over 100 million Hong Kong dollars, more than double their investment."
"This is just one example.
Since I joined Wan'an Group, I've seen many such regrets —
which is why our Group has developed so slowly."
"Of course, such cautious investment strategies aren't without merit.
Take the example from 1974:
the oil crisis affected Hong Kong's real estate industry, causing land prices to fall by 40% and property prices to fall by 30-40%."
"Many aggressively expanding real estate firms collapsed or were acquired when their cash flow dried up."
"Wan'an Group, having zero debt, although our profits also plummeted during that time, faced no bankruptcy risk and suffered no substantial losses — just earned much less for two years."
"So we weathered that storm safely."
"Therefore, Boss, if you really want rapid growth, the simplest way is to take out loans to expand our capital base.
Only with strong financial backing can we seize more development opportunities."
"However, expansion always brings some risk.
We are currently facing another oil crisis.
It may seem that the real estate industry is unaffected for now, but no one knows if another property crisis might arise."
"So it ultimately depends on how you choose to proceed," Yang Mingyi explained directly.
Lin Haoran nodded.
Indeed, Wan'an Group's situation was exactly as Yang Mingyi described.
For instance, most of the Group's current funds were tied up in the North Point project.
In addition, nearly 20 million Hong Kong dollars had been spent purchasing 5.1 million shares of Qingzhou Cement.
Now, the Group's available cash was only a few million Hong Kong dollars —
barely enough to do anything significant.
Realistically, Wan'an Group could leverage its assets and reputation to take bank loans,
allowing it to simultaneously develop two, three, or even more real estate projects.
Instead of committing large sums to one project and being financially paralyzed until returns came in.
Thus, while cautious growth minimized risk, it wasted many development opportunities.
As for another property crisis —
if no accidents occurred, another severe real estate crash would erupt around 1982,
particularly after a certain lady stumbled at the City Hall entrance.
That crisis would cause property prices to plummet by 60% compared to 1981 highs, and by 1983, the market would completely collapse.
But now, it was early 1979 —
leaving three years to prepare.
This was ample time to rapidly expand Wan'an Group.
Moreover, while the real estate crisis would be a disaster for others,
for Lin Haoran, it would be an incredible opportunity.
If handled correctly, he could use the crash to catapult Wan'an Group into Hong Kong's top-tier real estate companies.
But first, he needed to help Wan'an Group accumulate enough capital during these three years.
From now on, Lin Haoran intended to lead Wan'an Group's aggressive expansion —
no more slow, cautious development.
That wasn't his style.
"Mr. Yang, are there currently any good real estate investment opportunities?" Lin Haoran leaned back in his chair and asked.
"According to my information, the Hong Kong government will soon auction several land plots.
If you're interested, I can call and request the auction materials to be faxed over.
Perhaps you can take a look," Yang Mingyi suggested.
He had already guessed Lin Haoran's thinking —
their new boss seemed ready to pursue expansion via loans.
As a manager deeply attached to Wan'an Group,
Yang Mingyi welcomed this direction.
Otherwise, Wan'an Group would only fall further behind its competitors.
Lin Haoran nodded.
"Alright, arrange it."
Ten minutes later, Lin Haoran had the auction materials in hand.
This time, the government would auction only four plots —
located in Kowloon Tong, Kwai Chung, Chai Wan, and a reclamation project west of Yau Ma Tei.
After reading the descriptions, Lin Haoran immediately eliminated the Yau Ma Tei reclamation plot.
While the location was good and profits would likely be high,
reclamation projects involved enormous upfront costs and long timelines —
not suitable when he lacked massive capital.
Thus, Lin Haoran focused on Kowloon Tong, Kwai Chung, and Chai Wan.
Chai Wan was suitable for industrial buildings,
Kowloon Tong for low-density residential buildings.
After consideration, he concluded that the Kwai Chung plot had the greatest potential.
Since the 1960s, when Hong Kong developed container terminals at Kwai Chung,
the area's traffic had steadily increased.
Kwai Chung was now a major industrial zone with a large working population.
Property demand in Kwai Chung remained strong,
especially among the middle class seeking more affordable housing compared to city center prices.
Thus, a residential development in Kwai Chung would almost certainly sell quickly.
The starting auction price for the Kwai Chung land was 10 million Hong Kong dollars.
"Mr. Yang, roughly how much would we need to win the Kwai Chung land?" Lin Haoran asked.
"Based on previous experience,
final prices usually double the starting bid — depending on how many developers participate and their financial strength," Yang Mingyi answered.
Double —
around 20 million Hong Kong dollars.
Securing a plot twice as large as their North Point project for 20 million would be very cost-effective.
Although sale prices in Kwai Chung wouldn't match those of North Point,
the project's larger scale would ensure comparable overall profits.
"If we win the land, what profits can we expect?" Lin Haoran asked.
"For a plot this size," Yang Mingyi explained,
"construction would take three to four years."
"Profit depends on whether we sell off-plan apartments early or complete the project before selling."
"Off-plan sales recover cash faster but offer lower profits — perhaps around 30%."
"Assuming a land price of 20 million,
total development costs would reach 40–50 million Hong Kong dollars after adding construction expenses."
"Off-plan sales might yield about 10–15 million Hong Kong dollars in profit."
"If we complete construction and sell later, profits could potentially double —
but there's the risk of a market crash."
"If a real estate crisis erupts within two years,
and if we're reliant on loans,
then not only would profits vanish,
but we could even face losses," Yang Mingyi warned.
Lin Haoran nodded thoughtfully.
According to his memory of Hong Kong's property history,
the next real estate crisis would peak in late 1982 and 1983.
Signs of a downturn would begin appearing around late 1981.
It was now February 1979 —
just two and a half years before warning signs would emerge.
That was a very short window —
barely enough time to complete even a single residential development.
However, who said you had to finish building to make money?
If property prices were destined to soar over the next two years,
land prices would rise even faster.
Thus, Lin Haoran realized:
there was no need to build.
Simply acquiring land would be enough.
Two years later,
even selling the land alone could easily double his investment.
As for selling off-plan apartments for minor profits?
Lin Haoran wasn't interested.
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