System Only Gives Me Useless Gifts
187 – Leverage
The civic building in Magic City covered an entire block. It was several times bigger than the ones in Yide, and had its own food court and grocery for the government workers.
Within a large auditorium, the developers greeted each other and chatted casually as they waited for the auction to begin. Magic City was big, but the big players all knew each other.
“They are Beal Investments,” Rouxi whispered to Li Yun as they walked toward the front, pointing to the seats they wanted to take, but they were already occupied by another firm. “They have only been around for 10 years.”
Li Yun nodded.
Investment companies needed to be sharp and hire ambitious people to manage billions of dollars of investments. These people lived on the edge of bankruptcy all the time.
People think it was simple when it came to risk taking, but many people did not have a high risk tolerance. And when they did, it often ended up with bankruptcy and even death. The financial crash in 1997, for example, caused over ten thousand cases of suicide across the continent. However, for the less than 1% that made it out alive, they came out as billionaires.
“Ms. Ning, Ms. Song, what a coincidence!” Said a smarmy man in his early thirties.
“Mr. Jiang, pleasure,” said Ning Xuxu shaking his hand, then visibly taking out her makeup wipes to clean her hands. “You know me, I don’t like germs.”
Mr. Jiang looked at Rouxi, but she had already moved to her seat and sat next to Li Yun. Ning Xuxu followed from behind and sat down.
Rouxi wasn’t purposely avoiding people, but knowing Li Yun, it was best to avoid another incident.
“I am not going to do anything,” Li Yun innocently commented. “Mr. Jiang doesn’t seem to have digestion problems. He does have some drinking and angry problems.”
Rouxi wasn’t buying it. From their seats, she scanned through the other potential competitors. On the opposite side of the auditorium, she spotted Song Lili.
“Is that a relative?” Li Yun asked.
“She’s Song Lili, Song Taibo’s second daughter,” Rouxi responded. “She manages the real estate operation in Magic City. Her older sister, Song Renli, manages the business in Imperial City.”
Publicly, she was the youngest adopted granddaughter of Song Taiji, making her Song Renli’s adopted cousin.
“Do they know about you?” Li Yun asked curiously, he wondered how many people knew she was Song Taiji’s daughter.
Rouxi shook her head. Her other half siblings, Song Taibo and Song Tairen, both regarded her as their niece.
Most people assumed the then sixteen years old Song Gaode made a foolish mistake. From discussion with Elder Yi Bao, Chu Meya was around 21 when she tried to seduce Song Taiji. It was easy to convince everyone that she had seduced the young Song Gaode.
“How should I address your cousin?” Li Yun asked.
“It doesn’t matter, they don’t like me, so you don’t have to be cordial to them.”
“How do they feel about you being in charge of your own company?”
“They don’t like it, but they can’t do anything about it since it’s not the Song family's money.”
“But most of your business is overseas, so that shouldn’t conflict with theirs?”
“Many of the Song Family businesses are overseas as well, but not to the extent as the Xia and Tang. It’s just not as widely known.”
Li Yun was only slowly getting used to the players behind the scene. The five major families owned shares in many big businesses around the world. They were not people regularly talked about on the news, but considering that they controlled most of the press, it was understandable.
“Hm.. So that is Li Yun?” Song Lili thought as she caught sight of them from the other side of the room. “Keep an eye on them.”
Her secretary nodded. “Ms. Song, do we have to worry about them? They barely have enough assets to go up against us.”
“I’m not worried, just curious why she has decided to attend the Multy auction.”
Multy was a publicly traded company operated by the government under the State Council. In addition to real estate, they were the number one player in the antiquity market, above the Protector. The five big families all had shares in the company.
“Is it usual to have the auditorium filled up with investors?” Li Yun was like a river fish in the ocean seeing all the investors filling up the room.
“It is due to the recent government regulations of the real estate market in big cities,” Rouxi explained. “To limit problems of overcrowding the city, the government has placed a 25 million cap on the city and the total amount of land for construction to 3,200 square kilometres. In other words, any land they are selling in the near future is going to be more expensive.”
That was the general trend, stricter regulations in the future, so it was better to buy as soon as possible. People with privileged knowledge of the regulation change were going to be ahead of the general public.
“Too many people are speculating the market to rise and over leveraged their assets. If the bubble pops, the government fears another financial crisis mirroring 2008,” Ning Xuxu added. “The government will likely have tighter regulations in the future.”
Li Yun got the gist of it, especially the need to pre-screened bidders prior to attending the auction. It was to ward off people like the Beal Investment group in front of them. There were 9 people there, but not a single person looked capable. If there was one attribute they have, it was ruthlessness and risk tolerance.
The clock struck noon, the bell signaled the end of the bidding process. Unlike the previous bid opening that Li Yun had attended, the sealed bids for this particular auction had one deadline. After noon, no bids were allowed and the bids were opened immediately for all the properties that were available that day.
People spent weeks determining the bids for each location. It was important to determine the highest possible bids. A land that could generate 1 million a year wasn’t worth 10 million if the buyer wanted a quick turnaround. And a land that could generate 10 million, but required 100 million investment was beyond the ability of small firms.
The host opened the first submission. “150 million even,” he then opened the second bid. “189 million.”
Li Yun breathed in and braced himself to be completely outclassed by everyone else. After his seminar, many hospitals were buying Huifu for treatment, but it wasn't enough to break even. Even if he leveraged his company to borrow from the bank, at best, he could borrow 200 million yuan. Luckily, the site he was planning to buy was nowhere near Magic City, but in the middle of nowhere.
Everyone was bidding with hopes that the prices would escalate. Li Yun simply wanted land to experiment with feng shui, and profit was only an added bonus.
“Lot #544152,” the host announced as he ripped open the sealed bid. “Waning Moon Investment, 30 million.” Then the next. “Wu Xing, 41 million with mining rights.”
“41 million?” Everyone in the room thought whoever bought the land was crazy.
“Isn’t that in the middle of nowhere?” asked another. “Who’s going to build the infrastructure?”
“Crazy, it’s going to be another ghost town.”
As the audience speculated on who was crazy enough to bid so high, Li Yun didn't think it was too much. He really wanted the site and added an additional 5 million to what Rouxi thought would be the winning bid.
“Mirror Investment, 38 million,” said the host reading the last bid. “The land will go to Wu Xing for 41 million.”
After an hour, most lots were won by the big real estate companies, all of them had some connections with big five families. They easily spent billions of dollars to win prime market locations.
RoXu got two properties, and Li Yun only got the one in the middle of nowhere. Overall, it was considered a win, as they were going against companies with billions of dollars worth of equity.
It was not the type of money they could afford to play with. Wealthy people will usually become wealthier, it wasn’t a common saying, but a fact.
“It’s good that they are spending more than they should, but they are purposely overbidding as a way to artificially inflate the prices,” said Rouxi. “They could try to sell it for 20% more in the next five years, and there will still be investors willing to pay for it. Most likely, they will use it as leverage to buy other properties based on the price they paid rather than the actual value of the land.”
People thought it was crazy for companies to spend an exuberant amount on real estate and even antiquity, but the real purpose was to build equity and use it as leverage.
“Ms. Song, Ms. Ning, have you considered my offer to buy your company?” Mr. Jiang cried out when he saw that they were about to leave.
“We’ll have to discuss it internally,” Ning Xuxu replied.
“Then I’ll give you some time, but let me introduce you to Mr. Randall, he’s a partner that is assisting the BlueRock Group to acquire the Lion Building next month,” said Mr. Jiang. “Once the deals follow through, we might get better offers from other companies.”
Mr. Randall, a tall and handsome foreigner with blue eyes, nodded at the two ladies pleasantly. It was common for foreign investors to partner up with local firms to acquire real estate.
“That’s rather impressive, Mr. Randall speaks any Mandarin?”
“Not much,” he awkwardly replied.
“I hope you enjoy your stay in China.” Ning Xuxu then turned back to Mr. Jiang. “I’m sure if you have a better offer, you should take it. Ms. Song and I have no plans to sell our business, now if you will excuse me.”
They returned back to the apartment after a quick taxi ride. It was faster than taking their personal car as it wasn’t too far away.
“Why do you have to waste your time on that buffoon?” Rouxi ignored people she didn’t want to speak to.
“It’s fun, what do you think of that Mr. Randall?” Ning Xuxu asked.
“He’s well-off, but not at the level that they make him out to be,” it was Rouxi’s assessment of him. BlueStone Group was big, and they often attended functions hosted by the elite family. If he was anyone important, Rouxi would have already seen him.
“I thought he was a white monkey, but he seemed rather comfortable, so I didn’t know what to make of it,” said Ning Xuxu.
White monkeys were generally white men hired by companies to make the firm appear to have an international presence when in reality, they didn’t.
“I bet it’s simply a rich guy who’s bored and wants to act out as someone else,” said Rouxi. It was likely that Randall wasn’t his name either. “Yun, what do you think of him?”
“Random character number 37 that won’t be mentioned again?” asked Li Yun.
chocomug
I know a couple of white monkeys, but they are actually well-qualified people. Their boss brings them along to assist with negotiations.
It's ironic that the CCP is adding all these regulations to control real estate prices and bidding wars, but they actually made it worse. Even today it is a complete mess. I was in the middle of drafting this chapter up when news of the Evergrande crisis came out.
I should have added this in the previous chapters:
Huifu is in phase IV clinical trial. Hospitals not included in the study have to buy it rather than Shennong paying for it.
Yunli is waiting to be approved for phase III clinical trial, which should be a few days after this chapter.
Within a large auditorium, the developers greeted each other and chatted casually as they waited for the auction to begin. Magic City was big, but the big players all knew each other.
“They are Beal Investments,” Rouxi whispered to Li Yun as they walked toward the front, pointing to the seats they wanted to take, but they were already occupied by another firm. “They have only been around for 10 years.”
Li Yun nodded.
Investment companies needed to be sharp and hire ambitious people to manage billions of dollars of investments. These people lived on the edge of bankruptcy all the time.
People think it was simple when it came to risk taking, but many people did not have a high risk tolerance. And when they did, it often ended up with bankruptcy and even death. The financial crash in 1997, for example, caused over ten thousand cases of suicide across the continent. However, for the less than 1% that made it out alive, they came out as billionaires.
“Ms. Ning, Ms. Song, what a coincidence!” Said a smarmy man in his early thirties.
“Mr. Jiang, pleasure,” said Ning Xuxu shaking his hand, then visibly taking out her makeup wipes to clean her hands. “You know me, I don’t like germs.”
Mr. Jiang looked at Rouxi, but she had already moved to her seat and sat next to Li Yun. Ning Xuxu followed from behind and sat down.
Rouxi wasn’t purposely avoiding people, but knowing Li Yun, it was best to avoid another incident.
“I am not going to do anything,” Li Yun innocently commented. “Mr. Jiang doesn’t seem to have digestion problems. He does have some drinking and angry problems.”
Rouxi wasn’t buying it. From their seats, she scanned through the other potential competitors. On the opposite side of the auditorium, she spotted Song Lili.
“Is that a relative?” Li Yun asked.
“She’s Song Lili, Song Taibo’s second daughter,” Rouxi responded. “She manages the real estate operation in Magic City. Her older sister, Song Renli, manages the business in Imperial City.”
Publicly, she was the youngest adopted granddaughter of Song Taiji, making her Song Renli’s adopted cousin.
“Do they know about you?” Li Yun asked curiously, he wondered how many people knew she was Song Taiji’s daughter.
Rouxi shook her head. Her other half siblings, Song Taibo and Song Tairen, both regarded her as their niece.
Most people assumed the then sixteen years old Song Gaode made a foolish mistake. From discussion with Elder Yi Bao, Chu Meya was around 21 when she tried to seduce Song Taiji. It was easy to convince everyone that she had seduced the young Song Gaode.
“How should I address your cousin?” Li Yun asked.
“It doesn’t matter, they don’t like me, so you don’t have to be cordial to them.”
“How do they feel about you being in charge of your own company?”
“They don’t like it, but they can’t do anything about it since it’s not the Song family's money.”
“But most of your business is overseas, so that shouldn’t conflict with theirs?”
“Many of the Song Family businesses are overseas as well, but not to the extent as the Xia and Tang. It’s just not as widely known.”
Li Yun was only slowly getting used to the players behind the scene. The five major families owned shares in many big businesses around the world. They were not people regularly talked about on the news, but considering that they controlled most of the press, it was understandable.
“Hm.. So that is Li Yun?” Song Lili thought as she caught sight of them from the other side of the room. “Keep an eye on them.”
Her secretary nodded. “Ms. Song, do we have to worry about them? They barely have enough assets to go up against us.”
“I’m not worried, just curious why she has decided to attend the Multy auction.”
Multy was a publicly traded company operated by the government under the State Council. In addition to real estate, they were the number one player in the antiquity market, above the Protector. The five big families all had shares in the company.
“Is it usual to have the auditorium filled up with investors?” Li Yun was like a river fish in the ocean seeing all the investors filling up the room.
“It is due to the recent government regulations of the real estate market in big cities,” Rouxi explained. “To limit problems of overcrowding the city, the government has placed a 25 million cap on the city and the total amount of land for construction to 3,200 square kilometres. In other words, any land they are selling in the near future is going to be more expensive.”
That was the general trend, stricter regulations in the future, so it was better to buy as soon as possible. People with privileged knowledge of the regulation change were going to be ahead of the general public.
“Too many people are speculating the market to rise and over leveraged their assets. If the bubble pops, the government fears another financial crisis mirroring 2008,” Ning Xuxu added. “The government will likely have tighter regulations in the future.”
Li Yun got the gist of it, especially the need to pre-screened bidders prior to attending the auction. It was to ward off people like the Beal Investment group in front of them. There were 9 people there, but not a single person looked capable. If there was one attribute they have, it was ruthlessness and risk tolerance.
The clock struck noon, the bell signaled the end of the bidding process. Unlike the previous bid opening that Li Yun had attended, the sealed bids for this particular auction had one deadline. After noon, no bids were allowed and the bids were opened immediately for all the properties that were available that day.
People spent weeks determining the bids for each location. It was important to determine the highest possible bids. A land that could generate 1 million a year wasn’t worth 10 million if the buyer wanted a quick turnaround. And a land that could generate 10 million, but required 100 million investment was beyond the ability of small firms.
The host opened the first submission. “150 million even,” he then opened the second bid. “189 million.”
Li Yun breathed in and braced himself to be completely outclassed by everyone else. After his seminar, many hospitals were buying Huifu for treatment, but it wasn't enough to break even. Even if he leveraged his company to borrow from the bank, at best, he could borrow 200 million yuan. Luckily, the site he was planning to buy was nowhere near Magic City, but in the middle of nowhere.
Everyone was bidding with hopes that the prices would escalate. Li Yun simply wanted land to experiment with feng shui, and profit was only an added bonus.
“Lot #544152,” the host announced as he ripped open the sealed bid. “Waning Moon Investment, 30 million.” Then the next. “Wu Xing, 41 million with mining rights.”
“41 million?” Everyone in the room thought whoever bought the land was crazy.
“Isn’t that in the middle of nowhere?” asked another. “Who’s going to build the infrastructure?”
“Crazy, it’s going to be another ghost town.”
As the audience speculated on who was crazy enough to bid so high, Li Yun didn't think it was too much. He really wanted the site and added an additional 5 million to what Rouxi thought would be the winning bid.
“Mirror Investment, 38 million,” said the host reading the last bid. “The land will go to Wu Xing for 41 million.”
After an hour, most lots were won by the big real estate companies, all of them had some connections with big five families. They easily spent billions of dollars to win prime market locations.
RoXu got two properties, and Li Yun only got the one in the middle of nowhere. Overall, it was considered a win, as they were going against companies with billions of dollars worth of equity.
It was not the type of money they could afford to play with. Wealthy people will usually become wealthier, it wasn’t a common saying, but a fact.
“It’s good that they are spending more than they should, but they are purposely overbidding as a way to artificially inflate the prices,” said Rouxi. “They could try to sell it for 20% more in the next five years, and there will still be investors willing to pay for it. Most likely, they will use it as leverage to buy other properties based on the price they paid rather than the actual value of the land.”
People thought it was crazy for companies to spend an exuberant amount on real estate and even antiquity, but the real purpose was to build equity and use it as leverage.
“Ms. Song, Ms. Ning, have you considered my offer to buy your company?” Mr. Jiang cried out when he saw that they were about to leave.
“We’ll have to discuss it internally,” Ning Xuxu replied.
“Then I’ll give you some time, but let me introduce you to Mr. Randall, he’s a partner that is assisting the BlueRock Group to acquire the Lion Building next month,” said Mr. Jiang. “Once the deals follow through, we might get better offers from other companies.”
Mr. Randall, a tall and handsome foreigner with blue eyes, nodded at the two ladies pleasantly. It was common for foreign investors to partner up with local firms to acquire real estate.
“That’s rather impressive, Mr. Randall speaks any Mandarin?”
“Not much,” he awkwardly replied.
“I hope you enjoy your stay in China.” Ning Xuxu then turned back to Mr. Jiang. “I’m sure if you have a better offer, you should take it. Ms. Song and I have no plans to sell our business, now if you will excuse me.”
They returned back to the apartment after a quick taxi ride. It was faster than taking their personal car as it wasn’t too far away.
“Why do you have to waste your time on that buffoon?” Rouxi ignored people she didn’t want to speak to.
“It’s fun, what do you think of that Mr. Randall?” Ning Xuxu asked.
“He’s well-off, but not at the level that they make him out to be,” it was Rouxi’s assessment of him. BlueStone Group was big, and they often attended functions hosted by the elite family. If he was anyone important, Rouxi would have already seen him.
“I thought he was a white monkey, but he seemed rather comfortable, so I didn’t know what to make of it,” said Ning Xuxu.
White monkeys were generally white men hired by companies to make the firm appear to have an international presence when in reality, they didn’t.
“I bet it’s simply a rich guy who’s bored and wants to act out as someone else,” said Rouxi. It was likely that Randall wasn’t his name either. “Yun, what do you think of him?”
“Random character number 37 that won’t be mentioned again?” asked Li Yun.
chocomug
I know a couple of white monkeys, but they are actually well-qualified people. Their boss brings them along to assist with negotiations.
It's ironic that the CCP is adding all these regulations to control real estate prices and bidding wars, but they actually made it worse. Even today it is a complete mess. I was in the middle of drafting this chapter up when news of the Evergrande crisis came out.
I should have added this in the previous chapters:
Huifu is in phase IV clinical trial. Hospitals not included in the study have to buy it rather than Shennong paying for it.
Yunli is waiting to be approved for phase III clinical trial, which should be a few days after this chapter.
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