Potential of going south

Source : Business Times - 25 Sep 2008

With a fixed Guangzhou office in the works, Mapletree plans to expand in South China

BY THE end of next month, Singapore-based Mapletree will move to a permanent office in China. The real estate developer, which first ventured into China in 2005, has offices in Shanghai, Beijing and Hong Kong.

Most of its investments in China have been concentrated in the country’s northern and eastern regions, in places such as Tianjin, Beijing, Shanghai, Wuxi, Jiangsu and Xian.

Come end-October, with a permanent office in Guangzhou, the capital of Guangdong in South China, Mapletree, which owns $5.7 billion of real estate assets and runs $5.2 billion of third-party assets in Asia, plans to expand its investment base down south in China.

For now, the company’s investments in South China include a logistics park project in Guangzhou and a mixed-use development in Foshan.

‘Our first investment in South China was the acquisition of a logistics project - American Industry Park - in December 2007,’ says Chua Tiow Chye, Mapletree’s chief investment officer for regional developments.

The project was acquired for $50 million.

Mixed-use development Nanhai Business City, in Foshan City, is a joint venture with a local partner, with Mapletree holding an 80 per cent stake. This is an integrated business, living and leisure precinct with a gross floor area of about 350,000 square metres, costing US$341 million to develop.

‘It’s an exciting project because of the tremendous potential of Foshan City and, in particular, the Nanhai District,’ Mr Chua says. ‘As Mapletree’s first mixed-use integrated development in South China’s Pearl River Delta, this project gives us the opportunity to tap into the region’s growing affluence and the urbanisation growth trends out of major cities to surrounding areas.’

Local developers and investors dominate the real estate market in South China. Foreign investors active there are mainly Hong Kongers, Taiwanese, Japanese and Singaporeans.

These groups are tightly knit, so relationships play a pivotal role in doing business in the region.

‘A well-connected partner becomes an essential element for one to break into the market,’ Mr Chua says.

Government backing is also key. But Guangdong officials are ‘very business-oriented, open and transparent’, he says.

Noting that South China’s manufacturing industries and logistics sector are poised for further expansion, Mr Chua adds: ‘We see tremendous potential for the growth of modern residential and office developments. This will translate into growing demand for such modern, well-planned developments for work, live and play.’

He says that South China is at a critical stage of development because its economy is restructuring to embrace new industries and pursue new growth strategies.

‘South China has a good business environment, strong and professional local support and offers new business opportunities for foreign investors,’ he says.