Developer K Wah International eyes expansion in China’s affluent regions
It is one of several Hong Kong-based builders taking advantage of lower borrowing costs than those now available to their mainland counterparts
K Wah International, the property developer chaired by casino magnate Lui Che-woo, aims to boost its land bank and chase lucrative acquisition targets as it looks to build premium residential and commercial projects in affluent regions of the mainland.
It is one of several Hong Kong-based developers taking advantage of favourable borrowing costs compared with those available to their mainland counterparts as Beijing tightens restrictions on the overheated property market.
Chief financial officer Oliver Lam told the South China Morning Post that the Hong Kong developer will focus on the Yangtze and Pearl river delta regions for now, while avoiding projects with high risks.
“We have developed a strong team in Shanghai and it’s time for them to extend their reach to neighbouring cities,” he said. “We are expecting to secure a new project in our third city in the Yangtze River Delta soon.”
K Wah’s Yangtze River Delta presence is currently limited to Shanghai and Nanjing.
Its Grand Summit project in downtown Shanghai is one of the city’s top-end residential developments.
“K Wah’s aim is to build the best properties in any of the mainland regions where we do business,” said Lam. “Hong Kong developers still enjoy some advantages in competing on the mainland. We are able to access funds with lower borrowing costs.”
Mainland developers normally face interest rates of at least 6 per cent as Beijing steps up its attempts to cool the red-hot real estate market. Hong Kong builders can raise funds at much lower rates outside the mainland.
“We are also prepared for acquisitions,” Lam said. “We aim to take over land parcels that have the potential to be developed into high-end residential projects. There are opportunities for us to do so.”
On the mainland, K Wah develops both residential and commercial properties. It sold HK$10.3 billion (US$1.3 billion) worth of properties during the first half of this year, including units at the Grand Summit in Shanghai and J Metropolis in Guangzhou.
It is among a clutch of Hong Kong developers seizing the chance to pursue growth on the mainland as the authorities tighten restrictions on the property sector.
Earlier this month Swire Properties, one of Hong Kong’s oldest and largest builders of luxury homes and grade A offices, said it would seal a deal for a new commercial project in Shanghai soon.
Hong Kong developers tend to focus on first-tier cities to expand their business scale in the vast mainland market.
Lam said K Wah is unfazed by an apparent oversupply of shopping space on the mainland, with developers struggling to reduce their excess stock nationwide. He believes physical stores will still be a quintessential part of the retail industry despite the challenge from the booming e-commerce sector.
K Wah is the latest developer to outline expansion plans that display confidence in China’s commercial property market.
Future Land Development, a Hong Kong-listed mainland developer, recently said it plans to boost the number of shopping centres in its portfolio five-fold to 100 in the next three years.
“Young people’s definition of the good life has changed, and they are giving priority to emotions and experience, rather than good food and clothing,” said Ouyang Jie, a senior vice-president of Future Land. “The growth opportunities are still huge.”