Challenges, opportunities and niche plays were in focus Wednesday as MTD TV’s Asia Value-Add Forum 2021 continued with a panel discussion on squeezing new value from existing properties in mainland China.
Guests from Gaw Capital Partners, KaiLong, Cushman & Wakefield and World Union Investment joined Mingtiandi founder Michael Cole for the one-hour live event, sharing ideas on how “buy, fix and sell” approaches can boost returns on investments in Shanghai, Beijing and other locations.
The panellists were in agreement that mainland China’s investment market presents a challenging environment that rewards those with deep pockets and a strong team on the ground.
Gaw managing director Johnny Shao said traditional development in China is best left to local firms that can leverage connections and navigate bureaucratic hurdles such as tax planning and government approvals.
“From 2012 onwards, we have been mainly focused on value-add projects,” Shao said. “Since then, we have built a team of over 100 professionals in Shanghai, which enables us to provide more proactive asset management to our projects and on behalf of our LPs.”
Team-Building Test
Francis Li, who heads the Greater China capital markets team for Cushman & Wakefield, suggested that assembling a value-add team to cover China’s vast market is more difficult than pulling off the same trick in, for instance, Hong Kong.
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- Johnny Shao, Managing Director, Investments, Gaw Capital
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- Francis Li, International Director, Vice President & Head of Capital Markets, Greater China, Cushman & Wakefield
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- Don Tan, Managing Director, Fund Management, KaiLong
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- Megan Hu, Managing Director, World Union Investment
“For most foreign investors, they don’t have a team on the ground, so it’s not easy to play the value-add model,” Li said. “For Hong Kong, we have a very well-trained, professional system. You can engage your architect, your engineer, your manager, and everybody has a good standing in Hong Kong. In China, the local team is the essence to your value-add strategies.”
KaiLong managing director Don Tan declared that pursuing the buy, fix and sell approach shows particular promise for cashed-up investors as the region emerges from the pandemic.
“Just on the timing, it would probably be a very good thing if you have some money in your pocket right now, to look for the best investment opportunities,” Tan said.
He noted that the China market spent the last few years battered by trade wars, lending curbs and the COVID-19 outbreak, so the aftermath offers some breathing space for investors with the ability to quickly amass and deploy capital.
Niche Segments
Megan Hu, the head of World Union Investment, confirmed that local asset management companies in her Shanghai home base were more active pre-2017, before Chinese authorities began clamping down on leverage for real estate investments.
Gaw Capital sold Shanghai’s Cross Tower to World Union Investment in 2017
Hu’s firm has shifted its strategy towards niche alternatives like community malls, especially in neighbourhoods developed during the 1980s and 1990s that are ripe for refurbishment.
“You have these old housing projects located in the middle of Shanghai, with residents who are not burdened with a mortgage payment, who actually have quite decent disposable income,” she said. “However, these people have no access to 21st-century-standard recreation facilities.”
You can watch the full panel discussion above.
APAC Core Cities Next
The value-add forum will wrap up on Monday, 12 April with a panel focusing on Asia’s core cities outside mainland China, including case studies from projects in Hong Kong, Singapore, Seoul and more.
The core cities panel will feature contributions from Stephen Tang, head of value-add and opportunistic real estate for Asia Pacific at ARA Asset Management; Andrew Macpherson, head of asset development for Asia Pacific at JLL; Gordon Marsden, regional director for APAC capital markets at Cushman & Wakefield; and Jason Lee, chief investment officer for APAC at AEW.
After Monday’s event, the MTD TV team will take a few weeks off for Thailand’s Songkran new-year holiday before returning on Thursday, 29 April with the first session in our multi-family investment forum.
The event series on rental residential strategies promises to be Mingtiandi’s biggest ever, with sessions scheduled each week in May. In late June, MTD TV will be back again with the return of our Asia logistics forum, and August will bring a set of events focusing exclusively on sustainability in real estate.
Check out Mingtiandi’s full calendar of events this year right here.
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