Setting growth in the right direction
Martin Cubbon led Swire Properties on a cautious approach to the mainland and now has the success of Sanlitun in Beijing to show for it
Martin Cubbon, chief executive of Swire Properties, has had some exciting moments since he took up the job in 2009.
Among the high points were the sale of Festival Walk, a retail-office project in Kowloon Tong, for a record HK$18.8 billion and the listing of Swire Properties on the Hong Kong stock exchange earlier this year.
A chartered accountant, Cubbon, 54, joined the Swire group as internal audit manager at Cathay Pacific Airways in 1986.
Since then, he has served in a number of management roles across the group, including as a director of Cathay Pacific and Hong Kong Aircraft Engineering, chairman of Swire Beverages and group finance director of parent Swire Pacific, where he has been a director since 1998.
Swire Properties set up its first representative office in Guangzhou in 2001. But rental income did not start to roll in until years later when its first project, Sanlitun Village - a 1.46 million square foot retail-hotel complex in Beijing - opened its doors in 2008.
Rental income from the mainland, mostly from Sanlitun Village, whose tenants include Apple and Adidas, and another office-retail complex in Guangzhou that opened last year named Taikoo Hui, accounted for nearly 14 per cent of the company's HK$4.9 billion turnover in the first half of this year.
Swire Properties now has 5.2 million sq ft of completed investment properties on the mainland, mostly retail space, offices and hotels. In addition to Sanlitun and Taikoo Hui, there is another 3.2 million sq ft of retail, office, hotel and serviced apartment complexes under construction in Chengdu and Shanghai.
In Hong Kong, the developer's investment property portfolio totals 14.2 million sq ft, while it has 500,000 sq ft of property in the form of completed hotels in the United States and Britain.
Cubbon sat down with the South China Morning Post to discuss how he directed Swire Properties' growth strategy and managed a company with more than 4,000 employees.
What are the biggest management challenges you've faced as chief executive?
My job as chief executive is 50 per cent people management, 25 per cent corporate governance and 25 per cent investment appraisal.
I find the investment appraisal relatively straightforward given my background in finance, so that is less of a challenge than some may think. Time spent on corporate governance is unavoidable in a public company and the key challenge is to ensure appropriate corporate values are communicated and upheld without seriously impacting the company's ability to achieve and provide returns to its shareholders.
Therefore, by far the biggest challenge I face is managing people. My overriding responsibility is the deployment, motivation and assessment of people. There are no shortcuts; one simply has to spend a considerable amount of time talking and, most importantly, listening to others.
Why is Swire Properties reluctant to enter the mainland's residential development market?
We understand what our expertise is in the residential segment. It is typical high-end, large units in a big city close to downtown. That is a product we are known for, like what we are doing in Mid-Levels in Hong Kong. So, this is a skill level we have, a brand we have. But what the mainland is looking for is mass residential projects.
Swire has not taken part in any mainland land auctions recently. How long will you stay on the sidelines?
We will observe the behaviour of the mainland government on its housing policy. We are unlikely to bid this year, but may next year. Clearly, the mainland is our key growth area.
You have partnered in two mixed-use projects, in Chengdu and Beijing, with Sino-Ocean Land, which unlike Swire Properties is quite aggressive in land replenishment and sets price records to acquire development sites. Are there any management-style conflicts?
Those "land king" sites being sold for jaw-dropping prices are residential sites in which we are not a partner. Our joint ventures involve only commercial, offices and hotels. We are working well [in our joint venture project] in Chengdu.
We are happy to work with Sino-Ocean Land again as it has a long history in Beijing, and has a good relationship with contractors and the local government. They are responsible for construction and we know design and leasing. It is a good mix of skills.
How do you respond to analysts' concerns that Swire Properties' investment return on its mainland property is not as good as Hong Kong real estate?
They are right. The mainland takes longer and costs more to build well. Sanlitun has attracted lots of shoppers since it was opened in 2008, and so has Taikoo Hui, which opened last year. But the truth is it takes a longer time to build [than in Hong Kong]. We don't know what the competition will be five years from now. But Sanlitun managed to secure a strong positive rental reversion [tenants renewing leases at increased prices]. Once you prove the project is successful, people want to come and tenants want to pay higher rents.
Swire has set up an office in Singapore. Do you have any projects under negotiation?
We have opened the Singapore office for only six months. We are looking for opportunities.
You have three children. How do you manage to maintain work-life balance?
In a place like Hong Kong and in my job, there is no balance. I am surrounded by my job day in, day out, and even if I try to hide away in the Hong Kong countryside, e-mails will always find me!
None of this worries me - I like the involvement and intensity of it all. Work-life balance will be restored when I retire.