China developer Vanke sees slow mainland property market recovery
Mainland developer has no plans for IPO for newly established logistics property unit as it expands to sustain growth during market downturn
China Vanke, the country's biggest developer, on Monday said it had no plans to spin off its newly established logistics property business for a separate public listing in three years.
It acquired two logistics property projects in Guiyang and Wuhan earlier this year and is looking into a third one.
The aim is to become China's No2 modern logistics property operator by the end of 2018 with completed area of 10 million square metres.
The top player is Singapore-listed Global Logistic Properties.
"Our vision is to build another Vanke within 10 years, not in a short period of time. Just half a year has passed and we still have nine and a half year," said company president Yu Liang.
"It's unlikely to be listed within three years. Of course, it's possible it will be traded at the new third board (China's version of Nasdaq)."
Vanke has already got the backing of US private equity firm Blackstone and is talking to other partners, including those owning logistics facilities, to support its fast expansion, Yu said.
As part of the efforts to counter the impact of a slowdown in China's housing market in the next decade, Vanke is stepping into logistics property, property management services, education, serviced apartments and overseas markets to sustain growth.
"The (housing) market is recovering surely, but slowly," Yu said. Record inventory pushed the once-sizzling market into a downturn last year, spurring supportive measures from the government, which is scrambling to revive the economy.
Vanke's gross profit margin improved slightly to 22.2 per cent in the first half of the year from 21.4 per cent in the whole of last year but came in still lower than 23.7 per cent for the whole of 2013.
Any substantial margin recovery was unlikely given the industry's destocking process, soaring land prices and fierce competition among top rivals, Yu added.
Its property management services would expand rapidly, to cover over 500 million square metres of floor area by the end of 2018, an increase of more than fivefold, the company announced on Monday.
Vanke is betting on its strong reputation as a property manager across the country to compete against its listed rival Colour Life, which is controlled by developer Fantasia Holdings.
One option is to form joint ventures so that it not only manages projects built by itself, but also other developers. For example, Beijing Capital Land said last week that it had forged a property management joint venture with Vanke. Although the Beijing-based developer has a controlling 51 per cent stake, the services are provided by Vanke to all projects developed by Beijing Capital Land.
Overseas expansion would be mainly in the United States and Hong Kong, Vanke said, although the company has set up a local team in London to explore possibilities there and in other parts of Europe.
Last month, it bought a plot in Tuen Mun for HK$3.8 billion, its third project in Hong Kong. It is scheduled to be completed in 2019. It currently has six projects in the US and one in Singapore.
