Build-and-sell mentality is fading

HONG Kong property conglomerate HKR International wasn’t a household name in Shanghai until its swank HKRI Taikoo Hui retail, office and hotel complex opened in the Jing’an District in 2017.

The complex at the intersection of Nanjing and Shimen roads is HKR International’s flagship project on the mainland.

Developed jointly with Swire Properties, HKRI Taikoo Hui has become a commercial landmark in Puxi and a trendy venue for shopping, dining and entertainment.

In its home base Hong Kong, HKR International made its name over the years with the ongoing development of Discovery Bay, a large resort-style residential community on the city’s Lantau Island.

In an exclusive interview, Victor Cha, deputy chairman and managing director of HKR International, discussed with Shanghai Daily his company’s future on the mainland and how the market requires developers to move beyond the build-and-sell strategies of the past.

Cha, who holds an MBA from Stanford University, is the son of Cha Chi-ming, a Hong Kong industrialist and philanthropist who was born in Zhejiang Province and died in 2007.

Q: When did HKR International first tap the Chinese mainland property market and what prompted the decision to expand beyond Hong Kong?

A: We decided to enter the Chinese mainland market in the 1990s after seeing rapid economic development and massive urban construction following nationwide implementation of the reform and opening-up policy in 1978. It was not until 2000 that we bought our first real estate project — Chelsea Residence, a deluxe serviced apartment development on Huashan Road in Shanghai. It was later sold through strata title sales.

As for real estate development, we signed our first contract with the Jing’an District government in 2002 to acquire the Dazhongli site on Nanjing Road W. for construction of HKRI Taikoo Hui, our flagship property project on the mainland.

Q: Tell us something about the HKRI Taikoo Hui project.

A: It comprises a retail mall, two Grade-A office towers, two boutique hotels, one serviced apartment building and the “Cha House,” a revitalized historic building. It cost 17 billion yuan (US$2.56 billion) and covers 323,000 square meters. It’s a 50-50 venture between HKR International and Swire Properties, a partner we brought into the project in 2006.

The opening of this flagship project has greatly boosted our revenue in the Chinese mainland, which remains one of the three key markets for the group. Looking back, we feel it was a wise decision to approach the district government after our acquisition of the site and get the development permit changed from its original designation as a two-third residential site.

Q: How large is your portfolio here and what are your plans for future development?

A: At the moment, our business on the mainland is very focused on the Yangtze River Delta region — in particular, Shanghai, Jiaxing and Hangzhou in neighboring Zhejiang Province.

The Cha family has deep roots in Haining, a county-level city under the jurisdiction of Jiaxing. We always prefer to do business in a place or environment with which we are familiar.

Our current portfolio here includes the following projects: HKRI Taikoo Hui (mixed-use, Shanghai), Elite House (residential, Shanghai), Riviera One (residential, Jiaxing), City One (residential, Jiaxing), Oasis One (residential, Hangzhou) and The Exchange (office and retail, Tianjin).

We have also acquired two additional land parcels designated for residential purposes in Jiaxing’s economic development zone.

We celebrated our 40th anniversary last year, and we remain extremely upbeat about the prospects of the real estate industry on the Chinese mainland. Looking forward, we will stick to our strategy of spreading our business evenly across our three core markets: Hong Kong, the Chinese mainland and other parts of Asia, such as Bangkok and Tokyo.

Q: What are the most impressive changes you’ve seen in China’s real estate industry over the past decade?

A: The most notable change is the ever-increasing demand for real estate developers to go beyond pure builders and become providers of comprehensive urban services.

In the past, most developers focused only on property development according to a build-and-sell strategy. Now real estate companies need to have the ability to provide integrated services to survive in a highly competitive market. That means projects that combine a number of elements, such as residential, commercial, retail and other functions.

Q: What future major opportunities do you see for Chinese real estate developers?

A: First of all, the country’s Belt and Road Initiative will certainly provide great opportunities for Chinese enterprises, including real estate developers keen to expand overseas. More Chinese developers are expected to tap markets outside of China, work out new business models for new markets and optimize their global asset allocations.

Secondly, a series of 2035 master plans announced recently by major city governments that include Beijing, Shanghai and Guangzhou will offer more opportunities for real estate developers who are active participants in urban construction and vibrant players in city renewal projects.