Chapter 370: Real Estate Business Allocation
"You mean, collaborate with Changxing Real Estate in the property sector?" Li Ka-shing asked.
Now that he had made the decision to enter the real estate market, of course he had discussed it with Zhuang Yueming. Both of them believed in the potential of property, and that shared belief had given them the confidence to take the plunge.
Zhuang Yueming nodded and said, "Yes. Since we've already decided to move into real estate, we don't need to keep focusing so heavily on Cheung Kong Industrial's factory operations. As long as we maintain the current size of the business, it's enough. Even if we can't, we just need to avoid a large-scale layoff that would damage the company's reputation."
"Mm." Li Ka-shing agreed. "Still, Cheung Kong Industrial was how we started. Unless we really have no other choice, I'd prefer to keep it running normally."
"I understand. I've heard that Yang Wendong's companies are still producing glue traps on a large scale," Zhuang Yueming said with a smile. "Given how wealthy he is now, I'd imagine he thinks the same way you do—keep the business going, even if it's not a huge moneymaker.
But what really matters is seizing future opportunities. If a new venture can generate enough income, then subsidizing a loss-making factory becomes easy."
"Right. But how exactly do we collaborate with Changxing in real estate?" Li Ka-shing asked. "From what I've seen, Changxing Real Estate operates quite independently in Hong Kong. Unlike other developers, they rarely engage in joint ventures."
He'd done his research. Most real estate companies in Hong Kong preferred to work with peers. It helped spread risk and made bank financing easier.
But Changxing Real Estate rarely joined forces with others—probably because it had the deep backing of the larger Changxing Group, which gave it vast capital reserves and a strong line of credit with banks.
Zhuang Yueming responded, "That's true. But I also looked into their investment patterns and noticed something: they never invest in regular residential properties."
"Regular residential?" Li Ka-shing thought about it. "Changxing does have high-end residential projects. Maybe they just look down on the lower segment?"
"That's possible," Zhuang Yueming said. "High-end housing is more profitable. But the fact remains: the majority of housing demand in Hong Kong comes from regular people. The mass-market residential segment is much larger than the luxury one. There's no reason for Changxing not to get involved unless there's some concern.
My guess is that regular residential projects involve more disputes—customer service issues, public complaints—too much trouble. That might be why they avoid it."
"Or," Li Ka-shing offered, "Maybe even Changxing has limited resources. The group is big, sure—but it can't devote everything to real estate. So maybe they're just being selective."
Zhuang Yueming laughed. "Whatever the reason, the fact that they aren't in that space creates an opportunity for us. And as newcomers to the market, it makes sense for us to start with regular housing or industrial offices. We couldn't break into the high-end sector anyway."
"That makes sense." Li Ka-shing nodded. "I'll conduct a deeper market analysis. If the operations are viable, we can develop mass-market housing and bring Changxing in as a silent investor—just offer them a cut of the profits."
Zhuang Yueming added, "Exactly. That way, we'll also have an easier time securing loans from banks."
Banks always felt more comfortable financing projects backed by a major conglomerate. Big players rarely defaulted—even if a project failed, they'd usually still repay the loan.
"True." Li Ka-shing said. "The only issue is that Yang Wendong doesn't seem too optimistic about the real estate market right now. That might make him reluctant to invest in the short term."
Zhuang Yueming smiled. "That shouldn't be a problem. All you need to do is present him with a proper proposal. The market might dip, sure—but it will eventually recover."
"Right." Li Ka-shing nodded.
Historically, unless there was war, Hong Kong's property market followed a familiar pattern: six to seven years of boom, followed by one to two years of downturn. Over the long term, prices had always climbed.
A few days later, Zheng Zhijie knocked on Yang Wendong's office door.
"Come in," Yang Wendong said. He was reading an English-language newspaper from overseas. Seeing Zheng enter, he set it aside.
Zheng stepped forward and said, "Mr. Yang, this is a proposal from Li Ka-shing. He asked me to pass it along for your review."
"Oh? Let me see." Yang Wendong took the document and began reading carefully. After a few minutes, he chuckled. "This proposal is almost the same as the one we got from Sun Hung Kai."
Zheng Zhijie nodded. "Yes. They both noticed that Changxing Real Estate rarely collaborates with outside capital, and they've pinpointed regular residential housing as the one sector we don't touch."
"They develop the mass-market residential units, we provide partial funding, don't get involved in the operations, and just collect our share of the profits. Sounds pretty appealing," Yang Wendong said with a smile.
He wouldn't feel confident doing this kind of deal with just anyone—but with companies like Sun Hung Kai and Cheung Kong, which had solid track records in the original timeline, he had no such concerns.
Mass-market housing was a huge business. In his past life, many of mainland China's biggest developers rose to power through that very sector. But it wasn't easy. Like running a supermarket chain, it looked simple, but to truly excel at it required an overwhelming level of operational and managerial excellence.
Moreover, it was the segment most likely to generate public complaints and social disputes—messy and time-consuming.
That was precisely why he had avoided mass housing early on. But now, with reliable partners doing the legwork, and him just investing the capital, it was the perfect way to earn stable returns without stress.
Zheng Zhijie smiled. "Exactly. And since we're already investors in their companies, the collaboration pays off both in project dividends and in equity growth."
"Alright," Yang Wendong nodded. "Work out the investment amount with them. As for the property development itself, we can give a verbal commitment to future cooperation—but don't put anything in writing just yet."
There were many potential partnerships that couldn't be fully defined ahead of time—formalizing everything too early was both unrealistic and risky.
"Understood." Zheng Zhijie then asked, "Should we try to negotiate for a larger equity stake?"
"No need. Sometimes taking too much can be a bad thing. If their company performs well in the future, we'll find another opportunity to expand our stake," Yang Wendong said. "For now, 20% is enough."
When investing in new ventures, it was important to go step by step. Dumping too much money in at once could backfire. Entrepreneurs who thought they were capable might go start a new company—or worse, try to hollow out the joint venture.
That was human nature. If Yang Wendong were in their shoes, he might do the same. Many angel investments in his past life followed this logic—start small, take a modest stake, let the founders feel in control and grow the business.
Once their operations were deeply entrenched and spin-offs became more difficult, then the investors would step in to increase their stake. Traditional industries followed the same principle.
And besides, all of these companies would eventually go public. There would be plenty of chances to buy more.
"You're saying... to cooperate with Changxing Real Estate in the property sector?" Li Ka-shing asked.
He had already shared with Zhuang Yueming his intention to enter real estate. Both of them were optimistic about the market, which gave them the conviction to move forward.
Zhuang Yueming nodded and said, "Yes. Since we've already made the decision to move into real estate, we don't need to focus too much on Cheung Kong Industrial's factories anymore. As long as we can maintain the company's current size, that's enough. Even if we can't, as long as we avoid large-scale layoffs that would damage the brand's image, that's acceptable."
"Mm." Li Ka-shing agreed. "But still, Cheung Kong Industrial was our starting point. Unless absolutely necessary, I'd prefer to continue running it properly."
"I understand. I've heard that Yang Wendong's companies are still producing glue traps," Zhuang Yueming said with a smile. "Given his current net worth, I assume his reasoning is similar to yours. But what we should be focusing on is the future. If the new ventures are profitable, subsidizing a factory that's not making money will be no issue at all."
"Right. So, in terms of real estate—how would the cooperation work?" Li Ka-shing asked. "Changxing Real Estate tends to operate independently. They don't usually partner with other real estate firms."
Since he intended to step into the property sector, Li Ka-shing had naturally done his research. Most developers in Hong Kong liked to co-develop projects with their peers, mostly to mitigate risk and to make it easier to get financing from banks.
But Changxing Real Estate rarely entered into joint ventures. That might have been because of the strong financial backing of Changxing Group, which meant they already had abundant capital and excellent credit lines.
Zhuang Yueming replied, "That's true. But I also studied Changxing Real Estate's investment patterns. They never touch regular residential projects."
"Regular residential?" Li Ka-shing thought for a moment. "But they do build luxury housing. Maybe they just don't see the profit in the lower end of the market."
"That's one possibility," Zhuang Yueming said. "Luxury housing is more profitable, no doubt. But the majority of the housing market in Hong Kong is dominated by ordinary residents. That segment is far bigger than luxury. It wouldn't make sense for Changxing to ignore that unless there's another reason.
My guess? Regular housing invites too many disputes—small issues, customer complaints, problems that are a headache to deal with. So maybe they've decided to avoid the trouble altogether."
"Or maybe it's simply because even Changxing's capital is limited," Li Ka-shing added. "Changxing Group is huge, sure, but they can't possibly allocate everything to real estate. Maybe it's just a matter of resource management."
Zhuang Yueming smiled. "Whatever the reason, the fact that they're not participating leaves a window of opportunity for us. Since we're new to this space, we'd only be able to start with regular housing or industrial buildings anyway. We're not in a position to develop luxury projects just yet."
"That's true." Li Ka-shing nodded. "I'll run another round of market analysis. If it looks feasible, we can handle the residential side and then bring in Changxing to invest for a share of the profits."
"And that way," Zhuang Yueming added, "it'll be easier to get bank loans."
Projects co-developed with large conglomerates were always more attractive to banks. These big players rarely defaulted, and even if they did lose money, they'd usually still repay their loans.
"Exactly." Li Ka-shing said. "The only issue is that Yang Wendong doesn't seem too optimistic about Hong Kong's property market right now. It might be hard to get his cooperation in the short term."
Zhuang Yueming smiled. "That shouldn't be a problem. Just prepare a solid proposal. Even if the market dips temporarily, it will rebound eventually."
"Mm." Li Ka-shing nodded.
Looking at Hong Kong's property market historically, excluding wartime anomalies, it had always followed a pattern—six or seven years of boom, followed by one or two years of correction. Over the long term, prices always went up.
A few days later, Zheng Zhijie knocked on the door to Yang Wendong's office.
"Come in," Yang Wendong said, looking up from an English-language newspaper. When he saw who it was, he set the paper down.
Zheng stepped in and said, "Mr. Yang, here's a proposal from Li Ka-shing. He asked me to pass it along to you."
"Oh? Let me take a look." Yang Wendong accepted the document and read through it carefully. After a while, he smiled. "This proposal is quite similar to the one from Sun Hung Kai."
Zheng Zhijie nodded. "Yes, they've both noticed that Changxing Real Estate rarely works with external investors, and they've both identified mass-market housing as a sector we don't usually touch."
"They'll handle the residential development; we'll invest a portion and avoid getting involved in the management. Once the project succeeds, we just collect dividends. Sounds pretty appealing," Yang Wendong said with a smile.
With other companies, he might not have felt so confident. But both Sun Hung Kai and Cheung Kong were top performers in the original historical timeline. That track record gave him confidence.
And mass-market housing—while messy—was undeniably huge. In his previous life, many of the major real estate empires in China had started by dominating that very segment. It looked easy, like running a supermarket chain, but reaching the top took exceptional skill.
And it brought social headaches. Lots of them.
That was why he had avoided it in the early years. But now, with capable partners doing the heavy lifting and him only providing capital, it was a smart, stable source of returns.
Zheng Zhijie smiled. "Exactly. And since we're already shareholders in their companies, we gain returns both from the project itself and from the growth of our equity stake."
"Alright." Yang Wendong nodded. "Go ahead and negotiate the investment terms. As for the real estate project cooperation, we can give a verbal promise to strengthen future collaboration—but don't put anything in writing just yet."
Plenty of potential partnerships couldn't be clearly defined this early. Committing on paper would be premature and possibly risky.
"Understood." Zheng nodded, then asked, "Do you want to push for a larger equity share?"
"No need. Sometimes, too much can backfire. If they perform well in the future, we can find another opportunity to increase our stake," Yang Wendong said. "For now, 20% is more than enough."
Investing in a new company required pacing. Throwing in too much capital at once could make the founders feel threatened or rebellious. They might start a new company or try to hollow out the joint venture.
That was human nature. If Yang Wendong were in their position, he might do the same.
Many angel investors in the tech industry took this approach: take a small stake in the beginning to keep founders motivated. Once the company matured and it became harder to break it apart, investors would increase their holdings. The same principle applied to traditional industries.
Besides, all of these companies were bound to go public someday. There would be plenty of chances down the road.
"Alright, I'll reach a valuation both sides are happy with as soon as possible," Zheng Zhijie said.
Over the next month, Yang Wendong didn't have any particularly urgent matters to attend to.
On the personal front, he often invited Bai Yujie to the hotel to "discuss the view" from the window. On the business side, he stayed focused on the equity stakes in Sun Hung Kai and Cheung Kong. Given the state of the property market, he had no intention of overextending. Investing in the future giants of the industry was the smarter play.
At the moment, only these two firms qualified. They were the only future property giants that were still small in the early 1960s but would explode by the 1970s—largely because they had the guts to seize opportunities during the coming real estate crisis, stockpiling land aggressively and eventually overtaking their competition by 1968.
There were other companies that might be worth buying into, but their situations weren't clear. And many of them were at their peak valuations. It would be better to wait until the next property crash, when their operations were damaged, and then swoop in.
On December 6th, Zheng Zhijie finally concluded the negotiations: HK$2.3 million into Sun Hung Kai and HK$3.7 million into Cheung Kong, for 20% equity in each. Several layers of strategic cooperation would follow.
In excellent spirits, Yang Wendong invited Bai Yujie over again. After a round of "exercise," he was feeling rejuvenated.
As they snacked in the living room, Bai Yujie asked, "You seem really happy today. What's going on?"
Yang Wendong smiled. "I just invested in two very promising real estate companies. Of course I'm in a good mood."
"Real estate? Don't you already own a property company? Why invest in others?" she asked, puzzled.
"I do," Yang Wendong replied. "But Hong Kong's market is too big for any one player to control. I can't possibly dominate every corner of it. So in areas I can't—or don't want to—touch, other companies will step in. Why not invest in them and take a cut of the profits?"
In this world, monopolizing an entire market was both impossible and illegal.
And if his company became too big, it would also attract too much criticism—especially if housing prices surged. That public resentment would all be aimed at him. Better to remain in the shadows. With the right strategy, he could easily make more money than even the Big Four property families—without the backlash.
Thank you for the support, friends. If you want to read more chapters in advance, go to my Patreon.
Read 40 Chapters In Advance: patreon.com/johanssen10