CSI Properties boss tells how a small Hong Kong developer survives
Having a strong market sense and being willing to take risks are key to the survival of a small Hong Kong developer, says Mico Chung, the founder and chairman of CSI Properties
Regardless of its size, small developer CSI Properties is no stranger to the Hong Kong property community as it has been actively participating in the market in partnership with prominent local and foreign players such as Sino Land and British real estate fund Grosvenor.
"We are quite popular," said chairman Mico Chung Cho-yee, who was a right-hand man to PCCW chairman Richard Li Tzar-kai for five years. He left in 2003 and established CSI.
Looking back on the past 12 years, Chung says responding fast to market changes and being bold in taking risks have been the keys to the company's growth.
How can a small company survive?
Having a strong market sense is very important in the competition with big players. I always encourage staff to go out, talk to agents, talk to customers to know the market.
When we see the trend, we should make one or two steps ahead of other players. We are willing to take more risks.
Thinking ahead is important. For example, if the Hong Kong stock market continues to boom (triggered by the Shanghai-Hong Kong Stock Connect scheme), more mainland Chinese companies will come to set up offices and increase office demand. In view of the future trend, should investors buy more properties now before prices go up? For occupiers (tenants), should they renew their leases with landlords before rents rise?
But we have to be careful, we cannot make many mistakes.
As the company's chief, I need to have a sense to know if my staff's suggestion is right. I will also look at the production part, that is cost control. My staff have the autonomy to run their divisions, but I have the right of veto. So far, the outcome is not bad.
Have you made any wrong decisions?
Before Lehman Brothers collapsed in 2008, we had bought a residential site in Chung Hom Kok and put down a deposit of HK$50 million. Soon economic sentiment became bad, and Lehman was one of our major financiers.
We predicted our financial burden would increase if we went ahead with the development. The board of directors decided to walk away from the deal, forfeiting the HK$50 million.
Looking back, it cannot be described as a wrong decision because we made the best decision for the company on the basis of the information we had at the time.
However, if we had known the Lehman crisis would eventually be settled, we would not have cancelled the deal.
How do you see the Hong Kong and Shanghai residential markets?
In Hong Kong, the mass-end housing sector catering for first-time homebuyers will continue to see strong demand.
The top-notch homes targeting mainland Chinese and Hong Kong super-rich will also perform well due to limited supply. The buyers' purchasing power will not be hit by the recent mortgage tightening policies.
But properties targeting the middle-income group or upgraders will be hit, as they will find it difficult to arrange mortgages under the government's tightened lending policies and heavy taxes.
The secondary market at the moment is dead because of the tightened measures. It's time for the government to review the tightened measures.
On the other hand, the purchasing power of the growing middle class in Shanghai is strong as the economy grows. This is why we are building small houses with gardens in size of about 200 sq metres for those who want to upgrade their living area.
Why did your company plan to build 6,000 sq ft mega houses in Sheung Shui, in the New Territories?
As I said, the super-rich from Hong Kong and mainland China will not be affected by the tightened mortgage policies. We are not going to build 100 houses. We are just building six. We are confident the demand is there.
How did you get into the industry?
I came back to Hong Kong in 1984 after studying. I worked as a lawyer for two years and spent another two years at Standard Chartered as an investment banker.
Between 1998 and 2003, I worked for Richard Li's PCCW. I founded CSI in 2003. We bought a commercial property, upgraded it and resold at a higher price.
I started to invest in prime commercial property in 2004 when prices were low during the Sars epidemic. The first purchase was the 100,000 sq ft office building at 88 Gloucester Road owned by the Louis Vuitton family, bought at a price of HK$196 million and then sold for HK$783 million.
Prior to the formation of CSI, I have been investing in property since 1984. I was influenced by my father, who was a developer of small properties. I started the company with a couple of staff, now we have nearly 100.