Hong Kong company's mainland ambitions soar
Updated: 2012-03-23 11:39
By Hu Yuanyuan (China Daily European Edition)
Beijing's Sanlitun Village is one of the major commercial projects of Swire Properties in China. Provided to China Daily
Developer to increase portfolio this year
The Hong Kong developer Swire Properties Ltd says it aims to increase its business on the mainland by a third among its overall portfolio this year.
"If you look at what we've done in the last five years, we had a sort of entirely Hong Kong-based property business, with a bit in the United States. But over the next five years we will push very hard to increase our China investments," says Christopher Pratt, chairman of Swire Pacific Ltd, the parent company.
As a major landlord of upmarket office buildings and retail properties in Hong Kong and the Chinese mainland, Swire Properties' projects on the mainland will reach 590,000 square meters (about 6.35 million square feet) by the end of this year, compared with 1.31 million square feet in Hong Kong, Pratt says.
"By 2015, upon the completion of two projects in Shanghai and Chengdu, we'll have 743,000 square meters on the mainland. And there are a couple of projects we're looking at closely."
By 2015 Swire Properties will have two projects in Beijing, one in Shanghai, one in Guangzhou and one in Chengdu.
Though most of Swire Properties' projects on the mainland are mixed-use complexes consisting of office, retail and hotel, Pratt says retail was the sector in which the company excelled.
"The office market is much more commoditized in the sense that it goes up and down. We're good at retail, and retail follows GDP growth. And that's the sort of sector we want to be in China."
Robert McKellar, CEO of Savills Asia Pacific, says China's retail market will remain bullish in coming years, given the country's urbanization.
"I don't think there is much risk in the market so far, though there a growing number of property developers (are entering) the market."
Research by Savills puts the average yearly supply of shopping malls in Beijing and Shanghai at 750,000 square meters between 2011 and 2013. Rental growth in retail in first-tier cities is much better than in second tier cities.
The continuing market correction in the real estate market has squeezed property developers' cash, leading to a sluggish land market. But Pratt says now is still not the time to boost the land parcels.
"Prices have come down a bit, but not much. We don't see real evidence of a real correction."
For Pratt, Swire is committed to investing more on the mainland in a big way.
"It's just finding the right sites and the right cities. We have a very conservative balance sheet. If the right project comes along we can move very quickly. We don't have a sort of limit on investment."
Swire Properties was listed in Hong Kong in January as a spin-off of Swire Pacific.
"The listing, which enables the company to have access to the capital market directly, was important for us strategically if we are going to do really big things in China," Pratt says.
When Swire Properties listed in mid-January the company had no immediate plans to raise capital, with the sale of its Festival Walk shopping mall in Hong Kong providing adequate capital for its immediate plans, he says.