The Edge Singapore
Hong Kong’s Shui On to stay with quality projects as rivals fade in China’s property sector
Shui On Land remains focused on developing projects only in prime locations of Shanghai and other affluent regions on the mainland as the Hong Kong-listed developer de-risks its portfolio.
Stephanie Lo Bo-yue, an executive director of Shui On, told South China Morning Post in an interview that despite opportunities in distressed property assets, the company will not get involved unless the price and quality of the unfinished projects are extremely attractive.
“We are actively looking for opportunities,” she said. “For example, some land parcels at good locations in Shanghai will draw our attention and investment. We remain cautiously optimistic despite the uncertainty in the market.”
Shui On will take a prudent approach until there are more signs of recovery in the mainland’s property market, said Lo, the daughter of Vincent Lo Hong-sui, who founded Shui On in 2004. Stephanie joined the board as an executive director in 2018, and is widely seen as a successor to run the HK$8.1 billion ($1.4 billion) business empire.
Shui On retains its focus on large scale mixed-use, and sustainable
communities, with projects such as the Xintiandi landmark project under its belt. Xintiandi is an enclave of traditional shikumen (stone-gated) buildings in Shanghai that have since been converted into trendy bars and restaurants.
China’s property crisis has offered overseas developers an opportunity to increase their market share as debt-stricken developers struggle to survive. They have better chances of winning land parcels as competition has thinned, with many developers instead looking to offload assets to repay debts.
Some cash-strapped Chinese developers, under pressure to repay debt and rein in leverage, are even selling office buildings and shopping malls located in top-tier cities like Shanghai.
Lo said Shui On would consider buying some of these projects and assets, but stressed that priority would still be given to its own financial health and strength in assessing the potential deals, with a view to keeping the gearing ratio low.
“We are not the biggest developer in scale, but we pursue developments with the best quality,” she added. “We closely monitor market conditions, and target only those projects that fit in well with our strategy in terms of location and have an attractive value proposition.”
On April 29, Shui On inaugurated its Panlong Tiandi, a suburban village turned into a commercial complex in southwestern Shanghai’s Hongqiao area, which offers consumers an eco-friendly lifestyle.
Panlong Tiandi, featuring a watertown and 230,000 sq m (2.475 million sq ft) of public green space, is part of the Yangtze River Delta (YRD) integration initiative. The project, targeting 75 million people who live within an hour’s driving range, comprises commercial and entertainment complexes. It drew 200,000 visitors, including those from Shanghai’s neighbouring Jiangsu and Zhejiang provinces, a day during the five-day Labour Day holiday, Lo said.
Shui On is also considering acquiring other projects with the concept of an urban retreat in Shanghai and in cities in the YRD or the Greater Bay Area. Panlong Tiandi-style projects can meet consumer demand for health and sustainable developments, offering them a culture- and leisure-based lifestyle, she added.
The YRD’s demonstration area, which is located at the junction of Shanghai, Zhejiang and Jiangsu, and covers 2,413 sq km, is a pilot project which if successful could be replicated in other parts of the YRD — an area encompassing 360,000 sq km.
Besides shopping, Panlong Tiandi, which has a total floor area of more than 500,000 sq m, also offers activities like camping, horse riding and other outdoor sports.
Last month, Shui On unveiled a joint venture with state-owned Shanghai Pucheng Investment Development to carry out a redevelopment project in the historic town of Zhaojia Lou in Shanghai’s southern Minhang district, famous for its canals and water towns.
“Land pieces with good locations in cities like Shanghai are still rare assets for developers,” said Sam Xie, head of research at CBRE China. “Since retail spending and economic activities are returning to normal after China’s reopening, owners and operators of top-class commercial properties will be the key beneficiaries.”
At the end of 2022, Shui On had 14 projects in various stages of development in mainland China.
It is also one of the largest private commercial property owners and managers in China’s financial capital Shanghai, with a total portfolio of 82 billion yuan ($15.7 billion) of commercial assets located in prime locations in the mainland’s most populous city.