Pony Ma Spends 37 Billion Yuan to Become an "Island Lord"

Produced by Radar Finance | Written by Meng Shuai | Edited by Shenhai

Pony Ma's 'island-owning dream' is one step closer.

Recently, Shenzhen media reported that construction has begun on Tencent's global headquarters—the 'Internet Plus' Future Technology City. Tencent confirmed that the site where work has commenced is indeed the 'Penguin Island' project. According to data provided by the Bao'an District Development and Reform Bureau, the project covers a land area of 809,000 square meters, with a total floor area of 2 million square meters, and is slated for a total investment of 37 billion yuan.

According to Radar Finance, on November 29, 2019, Tencent won a land parcel in Dachan Bay, Xixiang Subdistrict, Bao'an District, Shenzhen, for 8.52 billion yuan, with the intention of developing it into the Shenzhen 'Internet Plus' Future Science and Technology City. The project covers a site area of 809,000 square meters and has a total floor area of 2 million square meters, and is expected to ultimately accommodate 80,000 to 100,000 employees.

With a construction cost of 37 billion yuan, the project has not placed significant financial strain on Tencent. In 2020, Tencent's total revenue reached 482.064 billion yuan, with net profit of 122.742 billion yuan—enough to build 3.3 'Penguin Islands.'

In recent years, in addition to Tencent, several other major internet and technology companies have also acquired land to build office buildings.

Tencent Invests 37 Billion to Build 'Penguin Island'

According to reports, Tencent's 'Penguin Island' project obtained its construction permit last year and held a groundbreaking ceremony in June of this year. Currently, excavation support work is underway, and heavy equipment such as pile drivers has already been brought onto the site.

According to publicly available information, 'Penguin Island' is located at the mouth of the Pearl River, within the Dachan Bay Port Area of Bao'an District. Maps show that Dachan Bay is adjacent to Shenzhen Bao'an International Airport, the Bao'an Central Business District, and the Qianhai Free Trade Zone, and is connected to the already operational Yanjiang Expressway, Bao'an Avenue, National Highway 107, as well as the future Shenzhen–Zhongshan Link.

Prior to this, Tencent, a large and well-established enterprise, already held three land parcels in Nanshan District, Shenzhen: in February 2006, it acquired Parcel T304-0111, with a land area of 5,999.85 square meters and designated for industrial use, on which the Tencent Building has since been constructed; in April 2010, it acquired Parcel T204-0072, covering 18,650.95 square meters and also zoned for industrial use, where the Tencent Binhai Building has now been built; and in May 2015, it secured Parcel T201-0081, spanning 24,947.84 square meters and designated for commercial office use, on which the Tencent Qianhai Building is currently under construction.

On November 29, 2019, Tencent secured a plot of land in Dachan Bay, Xixiang Subdistrict, Bao'an District, Shenzhen, for RMB 8.52 billion, with the aim of developing the Shenzhen 'Internet Plus' Future Science and Technology City—commonly referred to in the industry as 'Penguin Island.' According to reports, the project is slated for completion in two phases: Phase I is scheduled for completion in December 2024, while Phase II is expected to be finished by November 2026.

According to the 'Selection Plan for Key Industrial Projects on Site Plots for Shenzhen 'Internet Plus' Future Science and Technology City,' publicly announced by the Bao'an District Bureau of Industry and Information Technology in October 2019, the planned total floor area of the development project is approximately 2 million square meters. In 2019, Tencent had about 38,000 employees in Shenzhen, with a total office space of roughly 700,000 square meters—330,000 square meters in company-owned properties and 370,000 square meters leased. Based on the company's business growth trajectory, with an annual employee increase of 13%, the workforce is projected to reach approximately 89,000 over the next seven years. Assuming an average office space requirement of 20 square meters per employee, the total demand for office space will amount to 1.78 million square meters. After deducting the 330,000 square meters of company-owned office space in the Tencent Building and the Binhai Building, as well as the 150,000 square meters currently under construction at the Qianhai Building, the resulting office space shortfall will be 1.3 million square meters.

Tencent plans to establish seven major industry hubs under this project, including an R&D and promotion base for performance-based advertising, a global R&D base for Internet cloud technologies, an Internet-plus-healthcare hub, an Internet-plus-education innovation and practice center, an interactive hub for the Internet sports industry, an Internet-plus-entrepreneurship-and-innovation base, and a research center for cutting-edge technological fields, thereby creating a 'six bases and one platform' framework.

Specifically: the Performance Advertising R&D and Promotion Base project covers 250,000 square meters; the Global Internet Cloud R&D Base project covers 250,000 square meters; the International Internet + Healthcare Base project covers 240,000 square meters; the Internet + Education Innovation and Practice Base project covers 240,000 square meters; the Internet Sports Industry Interaction Base project covers 220,000 square meters; the Internet + Mass Entrepreneurship and Innovation Base project covers 100,000 square meters; the Frontier Technology Research Center project covers 200,000 square meters; and other supporting facilities cover 500,000 square meters.

According to data from the Shenzhen Bao'an District Development and Reform Bureau, the project covers a land area of 809,000 square meters and has a total floor area of 2 million square meters. It is expected to ultimately accommodate 80,000 to 100,000 employees and will include office spaces, employee apartments, commercial units, public facilities, a school (a nine-year integrated primary and secondary school with a high school), and a convention center.

According to the latest 'Bao'an District Major Projects Plan for 2021' released by the Bao'an District Development and Reform Commission in Shenzhen, the 'Internet Plus' Future Science and Technology City project will undergo further construction and expansion, with the newly announced total floor area reaching 3 million square meters. The development will include R&D facilities, dormitories, commercial hotels, other supporting amenities, and equipment rooms. As a result, Tencent's 'Penguin Island' will see its total floor area increase by an additional 1 million square meters.

The Shenzhen municipal government has also extended full support to this Tencent project. According to officials, Shenzhen's planned Metro Line 15, once operational, will run straight through the Dachanwan Peninsula, significantly enhancing local transportation connectivity. With the opening of Line 15, 'Penguin Island' will be even more closely linked to Tencent's headquarters buildings—the Tencent Building, the Tencent Binhai Building, and the Tencent Qianhai Building. Upon completion, the project is expected to attract and concentrate a greater pool of mid- to high-end professional talent, generating substantial economic benefits, fostering sustained and stable socio-economic development in Shenzhen and Bao'an, and further strengthening the inseparable bond between Tencent and the city.

Previously, MVRDV submitted a design proposal for Tencent's Dachan Bay project, which envisioned the entire development as a continuous, undulating mountain range. However, the project ultimately was commissioned to the world-renowned architectural firm NBBJ, marking another collaboration between Tencent and this firm.

Visualizations of the design proposal by MVRDV Architects

By then, a three-million-square-meter internet park will have been built here—equivalent to 8.5 Tencent Binhai Buildings. The establishment of Tencent's "Penguin Island" is bound to, much like Huawei's role in spurring development in the Songshan Lake area, propel Dachan Bay's economic growth to a new, higher level.

Tencent's Annual Profit Could Build 3.3 "Penguin Islands"

Does Tencent have enough cash to build its own "Penguin Island"? According to Tencent's 2020 annual report, the company’s total revenue reached 482.064 billion yuan in 2020, up 28% year on year; net profit stood at 122.742 billion yuan, a 30% increase over the previous year. Specifically, revenue from value-added services was 67 billion yuan, up 28%; online advertising revenue was 24.7 billion yuan, up 22%; and fintech and enterprise services revenue was 38.5 billion yuan, up 29%. Based on these figures, Tencent's annual profit could fund the construction of 3.3 "Enterprise Islands."

In the communications and social networking space, WeChat and Weixin together recorded 1.225 billion monthly active accounts, up 5.2% year on year, while QQ's smart-device monthly active accounts reached 595 million. On a daily basis, more than 120 million WeChat users post content in Moments, 360 million read official-account articles, and 400 million use Mini Programs. Mini Programs and WeChat Pay have helped small and medium-sized enterprises and brands strengthen their connections with customers; in 2020, transaction value generated through Mini Programs more than doubled year on year. The launch of "Video Accounts" has enabled brands and businesses to expand their audience reach and drive sales.

In the online gaming sector, Tencent not only boasts two cash cows—Honor of Kings and Game for Peace—but also several other best-selling titles, such as CrossFire Mobile, Call of Duty Mobile, and Moonlight Blade Mobile. In 2020, Tencent's online gaming revenue reached 156.1 billion yuan. Honor of Kings has topped the global mobile-game sales charts for two consecutive years and remains China's most popular mobile game in terms of monthly active accounts. PUBG Mobile has been the most popular mobile game overseas for two consecutive years, measured by monthly active accounts. The PUBG Mobile Global Championship has become the esports event with the largest viewership among mobile games. Meanwhile, the League of Legends World Championship 2020 recorded a peak concurrent viewership of over 45 million, setting a new record for esports events. In addition, Tencent has partnered with Nintendo to sell more than one million Switch consoles in China.

In the online advertising segment, revenue grew 20% year on year in 2020 to 82.3 billion yuan, driven by platform integration and algorithm upgrades, as well as increased demand from advertisers in sectors such as education, internet services, and e-commerce platforms. Social and other advertising revenue rose 29% to 68 billion yuan, primarily due to an expansion of WeChat's ad inventory, which generated more ad revenue, and to contributions from the mobile ad network's video-format ads. Media advertising revenue, by contrast, declined 8% to 14.3 billion yuan, with lower ad revenue at Tencent Video partially offset by growth in ad revenue from music-streaming apps.

In the digital content segment, Tencent's number of paid value-added service accounts reached 219 million in 2020, up 22% year on year. Its video subscription membership totaled 123 million, cementing its leading position in the long-form video industry. Tencent continues to develop popular film, TV, and anime IPs, creating highly engaging content that attracts paying subscribers. The subscription-based streaming model has also driven steady growth in music service memberships. Meanwhile, through Yuewen, Tencent is committed to enriching both free and paid content, enhancing community features, and building an IP-centric content ecosystem.

In the enterprise services segment, Tencent Meeting has become China's largest standalone cloud-based conferencing application, currently serving more than 5.5 million corporate customers and enabling enhanced internal communication while connecting with over 400 million WeChat users.

Why do major tech companies all dream of building towering office complexes?

Notably, it's not just geese that love to buy land—over recent years, major internet companies have also been snapping up property, pouring huge sums into constructing their own office towers.

ByteDance, the rapidly growing internet giant that has achieved significant success both domestically and internationally with its suite of apps including Douyin, TikTok, Toutiao, and Xigua Video, has also been on an aggressive acquisition spree in recent years. According to media reports, in 2019 ByteDance spent 9 billion yuan to acquire Zhongkun Plaza in Beijing; in June 2020, it paid 1.082 billion yuan for a prime plot in the Houhai Headquarters Base in Shenzhen, adjacent to Tencent's Shenzhen headquarters building; and on November 2, 2020, ByteDance officially moved into the Fangheng Fashion Center in Beijing as one of its office locations—a property it acquired for 5 billion yuan, marking ByteDance's first wholly-owned office building.

In July 2019, Lei Jun posted on his personal Weibo account: "After more than nine years of striving in Beijing, I've finally bought a home!" The property he purchased is none other than Xiaomi's Science and Technology Park in Beijing. According to available information, the park comprises eight buildings with a total floor area of 348,000 square meters, at a total construction cost of 5.2 billion yuan, and can accommodate over 16,000 employees. It officially opened on September 19, 2019.

In November 2020, Meituan acquired a plot of land in Shanghai's Yangpu District for 6.541 billion yuan, with a transfer area of 52,600 square meters. It is reported that Meituan will build its headquarters in Shanghai.

According to Kuaishou's prospectus, on January 15, 2021, Kuaishou entered into a framework agreement with Beijing Shou Nong Information Industry Investment Co., Ltd., agreeing to purchase several properties with a total gross floor area of approximately 114,200 square meters from Beijing Kuaishou for a total consideration of about 2.8 billion yuan, and to lease several properties with a total gross floor area of approximately 119,500 square meters along with associated parking spaces, at a total monthly rent of about 22.8 million yuan for the first three years. These properties will be primarily used for office purposes, and Kuaishou plans to fund the consideration using internal funds.

On January 22, 2021, Bilibili acquired a plot of land in the Dinghai Community of Yangpu District, Shanghai, for 8.118 billion yuan, with plans to construct a new headquarters building on the site. The land is located along the eastern Bund in Yangpu, right next to the Huangpu River, offering excellent views and prime topography. According to reports, the proposed building will have approximately 359,000 square meters of above-ground floor space, including 289,000 square meters for office use, 34,000 square meters for commercial purposes, 21,000 square meters for cultural and sports facilities, and 15,000 square meters for rental housing; the underground portion will cover about 303,600 square meters, with 92,000 square meters dedicated to commercial use.

Interestingly, the land plot purchased by Bilibili is right next to the one bought by Meituan, meaning the two companies will be neighbors in the future.

According to industry insiders, large corporations are acquiring office buildings for several reasons: first, their existing office spaces can no longer accommodate the growing number of employees, the expanding business operations that require more workspace, and the need to establish comprehensive, high-standard service campuses.

On the other hand, for internet technology companies, land purchased at great expense can be capitalized as fixed assets. In the early years, many firms had to constantly relocate their offices and staff, moving multiple times in search of suitable premises. Although acquiring land requires a substantial upfront cash outlay, it can lead to significant long-term savings on rental costs. Moreover, land is classified as real estate, which, under certain circumstances, qualifies for input VAT credit. Purchasing office buildings can also be viewed as an investment; for instance, the land acquired by Sohu in its early days has since appreciated manyfold, and today that land has become one of the company's most valuable assets—making it a classic case study in the industry. In addition, local governments, eager to retain major tax-paying enterprises that drive regional economic development, often offer preferential policies to attract large firms to invest in property.

Note: This article is an original work by Leida Finance (ID: leidacj). Reproduction is prohibited without authorization.

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