Chen Min Chen Feichi
Since the central economic work conference first emphasized the concept of “urban renewal” in December 2019, major cities have gradually entered a period of rapid development of urban renewal in recent three years. At the local level, most municipalities directly under the central government and provincial capital cities have issued a series of policies for urban renewal to promote and guide the implementation of urban renewal. In the 14th five year plan, the state also clearly proposed to accelerate urban renewal, transform and improve the functions of existing areas such as old communities, old factories, old blocks and villages in the city, and promote the optimization of urban spatial structure and quality improvement.
There are commonalities in the implementation of such policies at the level of investment and financing. First, it generally emphasizes the participation of state-owned platforms, especially urban renewal projects with public welfare content. In the previously published six “main roles” of local platform companies in urban renewal, it specifically discusses the role of state-owned platforms as the main body for the overall implementation of urban renewal projects; Second, it emphasizes the need to encourage the introduction of social capital and improve the investment and financing capacity of the project and the professional level of construction and operation.
In practice, there have been many successful cases of government enterprise cooperation in projects with relatively small investment volume, such as the reconstruction of old residential areas. In many cities, the renewal work will involve a large scale and a wide variety of contents. For example, in the area projects to be renewed with a mixture of old buildings and enterprises, we often encounter the investment and financing cooperation between local governments, state-owned assets platforms and social capital, and there are some problems such as unclear paths, unclear boundaries and no grasp.
This kind of large-scale urban renewal project in this area is a complex system engineering. To solve the problem of cooperation, we need to use the system engineering method to simplify the complex problems and solve the problems of investment and financing and government enterprise cooperation through “dimensionality reduction”.
I. classification logic of large city renewal projects
The essence of the difficulty in promoting large-scale urban renewal projects is caused by the diversification of renewal categories, implementation paths, investment and financing mechanisms, professional requirements and so on.
Urban renewal is a broad concept, which includes many types of renewal methods and function orientation. To do a good job in “dimensionality reduction”, we must first clarify what types of large-scale urban renewal projects cover. In order to facilitate understanding, we classify large-scale urban renewal projects into four categories for analysis from the perspective of whether to dismantle, rebuild and renew the function orientation:
One is demolition, reconstruction and function change.
This kind of project usually refers to that the architectural form, construction quality and use function of the original land do not meet the positioning and needs of the current regional development. The function of the original land needs to be adjusted, and the original buildings need to be demolished and rebuilt. It is usually accompanied by the improvement of infrastructure and public supporting facilities.
In this kind of most common urban renewal projects, the participation methods of the original owners are also relatively diverse. Some owners have simple demands and will move away after giving reasonable compensation, and the land will be redeveloped after being collected and stored by the local government; Some owners have certain development ability and willingness to participate in the development. Under the planning scheme approved by the competent government department, they transform themselves or introduce investment partners for joint development.
Based on the land use status of each project and the different planning conditions approved by the competent government departments, such projects may achieve their own financial balance; There may also be sufficient surplus space to contribute some supporting land to the city or build some supporting facilities on behalf of the city; Or it can not be balanced and needs some financial subsidies from the local government.
The second is demolition and reconstruction, but the function remains unchanged.
There are also many cases of such projects. For example, if the land was originally used for public facilities by the local government, the local finance naturally bears the transformation cost. There are also some special situations. For example, in the reconstruction project of a dormitory building in Shijingshan District, Beijing, the original owner is a local state-owned enterprise. The original dormitory building has been in disrepair for a long time and belongs to dangerous and old buildings, and the surrounding municipal supporting facilities also need to be reconstructed. On the one hand, the original owners still need several dormitory buildings to resettle employees, on the other hand, they are unable to bear the funds for demolition and reconstruction alone.
Therefore, the competent government department negotiated with the original owner to introduce social capital. The government subsidized part of the funds (mainly corresponding to the municipal supporting transformation), the original owner invested part and the social capital invested part to demolish and rebuild the old dormitory building and improve the municipal supporting facilities at the same time.
The part of social capital contribution will recover the investment through the income from project property services and public space operation within a certain period of time.
This mode of sharing and co construction will be widely used in many local reconstruction projects in the future.
Third, it is not removed but the function is changed.
Such projects are mainly aimed at the building space in the urban built-up area that no longer bears the original use function, but has retention value or is not suitable for large-scale demolition and construction, such as the old factory buildings in the urban core area. Its typical representatives are Beijing 798 Art District, Shanghai Xintiandi, etc.
For such projects, some core cities have issued incentive policies to promote the functional transformation of such building space. For example, the guiding opinions on protecting and utilizing old factories to expand cultural space issued by Beijing put forward “transformation projects that do not change the nature of the original land, change the original property right relationship, and do not involve redevelopment and construction”.
It can be concluded that the nature of the land remains unchanged, the main form of the building remains unchanged, and the property right unit remains unchanged, but the actual use function is allowed to change.
In order to solve the problems of insufficient investment capacity of the original owner and insufficient professional experience in the operation of new functional industries, such projects will usually be based on the new urban planning, and the local government and the original owner will jointly introduce professional investors to be responsible for the investment, construction and operation of the project.
Fourth, do not dismantle, only do facility maintenance and supporting improvement.
This kind of project refers to the original buildings, which are facing problems such as aging facilities and imperfect municipal supporting facilities, but have not been demolished. It is necessary to continue to give full play to the original building functions, repair the building body and improve the surrounding municipal supporting facilities.
Such projects are often seen in the urban renewal of the transformation of old residential areas. For example, in the reconstruction of Beijing Jinsong old residential area, the government will introduce social capital to carry out the environmental renovation of the public areas in Jinsong District 1 and Jinsong District 2 and the construction of the street lamp rack empty line into the ground; Invest and transform the idle bicycle shed in the community, and be responsible for the later operation management; Invest and transform the relevant contents of the entrance and exit access control system of the community.
The types of urban renewal projects are very diverse, and enterprises participate in a variety of ways, which means that there are many factors that determine the operation mode of the project, including:
The functional characteristics of the original building; The type and willingness of the original owner; New planning function orientation; New regional industrial orientation; Initiating procedures and implementing subjects; Whether to introduce social capital; Types of support policies given by local governments, etc.
To sum up, we believe that urban renewal is a broad concept, and urban renewal projects should also conduct investment research from a more diversified perspective.
II. difficulties faced by introducing social capital into large urban renewal projects
Urban renewal has entered a new stage of development. There have been many successful experiences all over the country, and social capital has begun to participate in all kinds of urban renewal projects more widely.
However, in practice, many large-scale urban renewal projects still face great difficulties in implementation after the introduction of social capital.
Taking the renewal area of a city in Central China as an example, the planned area of the project is about two square kilometers. There are a large number of dormitory buildings and old communities in the 1970s and 1980s, as well as some small industrial enterprises that need to be transformed and upgraded, and the infrastructure and service supporting facilities are seriously lagging behind.
To this end, the local government has issued a package of support policies, used all the net land income generated by the transformation in the area for the improvement of the infrastructure in the area, authorized the local specially established state-owned assets platform as the implementation subject of urban renewal in the area, coordinated the first and second level linkage development and transformation and the use of various government support funds, and was responsible for the integrated management of various assets and resources, and introduced powerful social capital to participate.
With the support of relevant policies and the authorization of the government, the state-owned assets platform has conducted a preliminary investigation on the transformation intention of various owners in the area, and roughly calculated the overall transformation cost and development income. On the whole, it needs to invest nearly 20 billion yuan, which can roughly achieve the balance of input and output.
On this basis, the state-owned assets platform is ready to select a large investment enterprise interested in participating in the urban renewal project to jointly undertake the package development and transformation of the project with itself, so as to obtain returns through a market-oriented development path.
However, when really preparing to sign the investment cooperation agreement and enter the implementation stage, the state-owned assets platform and investment enterprises found it difficult for the two sides to agree clearly on some specific cooperation issues.
\u3000\u30001. How long should the cooperation cycle be? Do many types of urban renewal subprojects in this project meet the implementation conditions? What if there is a stuck point?
\u3000\u30002. Can the investment cost be determined in the early stage? Can the compensation standards of various enterprises and property right units be determined?
\u3000\u30003. In the process of primary and secondary linkage development, should all the land subject to bidding, auction and listing be invested and the partners participate in the development themselves?
\u3000\u30004. Are investment partners responsible for all types of industrial operations and have professional capabilities?
\u3000\u30005. Many property rights units themselves also require to participate in the transformation and development projects. Do they agree to develop jointly with this investment partner introduced by the state-owned assets platform?
Like this, these problems are common in large-scale urban renewal projects. They reflect the core characteristics of complex urban renewal projects, that is, “there are many open conditions in the implementation process”. This “openness” is reflected in several aspects:
First, the content type is open. District level urban renewal projects usually include a variety of construction and operation contents. The transformation forms and operation service contents of buildings are very diverse. The degree of demolition and reconstruction needs more communication with the owners. The operation contents cover community space, commercial operation, property management, etc. the types of industries are also diverse, which can not be completed by a single enterprise.
Second, the owners demand openness. District level urban renewal projects involve many types of owners, including residents and enterprises and institutions. The types of land and properties involved are also different. Some owners are willing to transform themselves, some want to introduce partners, and some want to be demolished and compensated. Their demands are different, and the standards are not invariable. Many work needs to be negotiated.
Third, promote the process of opening up. Due to the existence of the first two points, there are many uncontrollable factors in the promotion process of district level urban renewal projects, involving multiple stakeholders and diverse policy paths. Many work needs to be discussed on a case by case basis. The planning implementation and investment renewal plan need full flexibility. No one can ensure 100% full implementation.
It is precisely based on the above “open” characteristics that the cooperation between local governments, state-owned assets platforms and social capital is more complex in large-scale urban renewal projects, and many contents are difficult to be clearly agreed at one time in the early stage.
iii. solve investment cooperation problems through “dimension reduction”
By analyzing the characteristics and difficulties of large-scale urban renewal projects, we can re understand how the state-owned assets platform entrusted with the overall planning function by the local government should “make overall planning” and how to “take into account” the characteristics of different types of sub projects and the demands of partners.
For matters requiring overall consideration, sort out the specific starting points:
First, coordinate the policies and funds given by the government, and build different capital investment relationships between different types of sub projects and property rights subjects.
The local government gives a package of policies and financial support to the state-owned assets platform, which is generally used for the construction investment or subsidy of various urban renewal subprojects in the area. In the actual use process, it is necessary to build different capital investment relationships according to the characteristics of various subprojects and the demands of property right subjects. For example, provide financial subsidies for the reconstruction of old residential areas; For industrial upgrading and transformation, provide municipal supporting investment subsidies or participate in Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) investment; Provide direct investment funds for demolished and rebuilt public buildings; For the relocated main body, provide compensation for land acquisition and demolition; For development land, participate in investment as a participant.
As the implementation subject, the state-owned assets platform integrates various policies, funds and resources in the region. The premise of overall utilization of funds is to deconstruct the capital demand characteristics of various seed projects and clarify the capital investment and recovery path.
Second, coordinate the overall input-output balance of the project, draw the boundaries of different sub projects, and create participation conditions for different types of partners.
For the state-owned assets platform as the implementation subject, the whole urban renewal area can be regarded as a unified large project. Naturally, it also has to face the openness and uncertainty of the implementation of many different sub projects, which is its significance as the overall planning subject.
For all kinds of professional investment enterprises introduced by the state-owned assets platform to participate in the development work, they need investment projects with clear boundaries, clear input-output paths and suitable for their own professional characteristics. In the face of major uncertainty and complex investment content, the vast majority of investment enterprises will flinch. Obviously, their identity is different from the state-owned assets platform, and they are more suitable to participate in investment cooperation at the sub project level.
Therefore, in order to coordinate external cooperation resources, the state-owned assets platform as the implementation subject also needs to disassemble the overall project, and introduce partners according to the characteristics of the project and the investment demands of market-oriented cooperation subjects.
From the above analysis, it is not difficult to understand the cooperation dilemma of “it is difficult for both parties to agree clearly on specific cooperation issues”. For large, complex and comprehensive urban renewal projects with large space and multiple investment contents, in order to achieve “overall planning”, we must first do a good job in project disassembly. We can call this process “dimensionality reduction” process, that is, the cooperation of complex projects will be “simplified” at the sub project level.
After the project decomposition and “dimensionality reduction”, the dual identity of the state-owned assets platform as the implementation subject becomes clearer. At the level of overall development of the whole urban renewal project, the state-owned assets platform is the main body of resource integration on behalf of the government. At the level of various sub projects, it is a market-oriented investment subject participating in the investment with external cooperative enterprises and owners. Each partner involved can focus on the professional fields within their own ability and do better without being troubled by the promotion of other sectors. The overall cooperation framework has also been transformed into a “1 + 1 + 1 + n” cooperation system of “local government + state-owned assets platform + main investment partners + multiple professional social capital”.
Urban renewal is the general trend of China’s urbanization development. This work is diverse and complex. Almost every large city has some large-scale and complex large-scale district level urban renewal projects. The promotion and implementation of these complex projects requires systematic engineering thinking and “dimensionality reduction” to truly realize integration, make the implementation more flexible and make it easier for all kinds of professional enterprises to enter, Make government enterprise cooperation simpler and implementation more feasible.
(the author is the general manager and deputy general manager of Beijing Rongbang Ruiming Investment Management Co., Ltd.)
