Zendai owner turns his back on property, and looks instead to art
Self-styled Chinese culture lover Dai Zhikang describes the recent housing boom as a “dead cat bounce”
Dai Zhikang is known in China’s corporate world for his can-do spirit.
The founder and chairman of Shanghai-based Zendai Group, has had wonderful success in sniffing trends in the mainland’s property sector, reaping the rewards.
But now he has made an incredibly bold decision — he plans to exit from the once-great jewel in the crown of China business, and move away from property investment.
Likening the recent property market boom to a “dead cat bounce,” the 52-year-old wants to rebuild Zendai as a group, and that means top to bottom, both cultural and in how it makes its money.
“A buoyant real estate industry in China was just part of our history,” he said. “Zendai has to revamp its businesses to adapt to the great changes now happening across the Chinese economy.”
Founded by Dai in 1993, Zendai has been one of Shanghai’s leading property developers for the past two decades, with a clutch of prominent deals and projects under its belt.
Real estate was just a makeshift part of my business plan, and now it’s time to go back to our core business, and that’s finance.
The group was catapulted into the national limelight in 2010 when it became the winning bidder for a piece of prime land on The Bund, for record price of more than 9.2 billion yuan.
The company was also one of the earliest domestic developers to embark on a “go-global” strategy when in late 2013 it ambitiously unveiled plans to transform Modderfontein — a suburb in eastern Johannesburg, South Africa — into the “New York of Africa,” a total investment worth US$8 billion over 15 years.
“By nature, Zendai is a comprehensive investment firm, despite having impressed people as a property developer,” Dai said.
“But real estate was just a makeshift part of my business plan, and now it’s time to go back to our core business, and that’s finance.”
Last year, Dai and his daughter sold the family’s entire 42 per cent stake in Hong Kong-listed subsidiary Shanghai Zendai Property to China Orient Asset Management for HK$1.25 billion, sending an early message to the market that the group planned to quit the property sector altogether amid a wider overhaul of the business.
“Land prices become too expensive and made it difficult for us to build quality projects,” Dai said, adding quick developments to chase quick returns is not in line with its business philosophy.
China’s infrastructure construction and property development, of course, used to form the backbone of the country’s breakneck economic growth since the 1990s.
The red-hot real estate sector had forced the governments to intervene regularly, mainly through austerity measures to rein in soaring home prices, and unfortunately mainly in vain.
Since the second half of 2015, real estate markets in the mainland’s biggest cities such as Shanghai and Shenzhen have again been on bull runs, with house prices in the former, especially, surging ahead by at least 50 per cent in the past 10 months.
The country’s home-buying euphoria — a direct result of worries over a growing shortage of quality sites in China’s most-developed metropolises, triggered a fresh round of record-setting land auctions recently, with developers paying hefty premiums for new parcels of land as soon as they hit the market.
The consensus among developers and analysts is that property prices in Shanghai will continue to rise despite the municipality’s curbs on mortgage lending and other home-purchase restrictions.
But Dai likes to look wider.
He singles out culture, financial services and investment among a clutch of sectors including the internet, as becoming the new driving forces of the mainland economy.
After earning a bachelor’s degree in finance at Beijing-based Renmin University in 1985, Dai went onto a masters from the financial institute of China’s central bank, two years later.
He worked for China Citic Bank, Dresden Bank and a securities brokerage in Hainan before becoming president of Fudao Fund Management, one of the mainland’s earliest mutual funds.
By the time he established Zendai in 1993, be was being lauded within mainland stock market circles as a rare investment guru, who followed the principle of picking stocks based on valuation.
At that time, the mainland stock market was dubbed by renowned economist Wu Jinglian as a casino, little more than a speculators’ market where investors chased short-term gains while making their investment decisions on rumours.
“I majored in finance and started up my businesses in the field,” Dai said.
“Now I want to make a strong comeback in finance and investment.”
Dai was listed as the 65th richest mainlander by Hurun Report in 2007, with personal net worth of 10 billion yuan (HK$11.8 billion).
“People are getting rich in terms of their financial strength,” he said.
“And in turn, they have shifted their attention to precious pieces of art, and other areas of spiritual appreciation, which has also ushered in huge market potential.”
Zendai has already launched investment funds focusing on art and financial products, and Dai says the country’s art world has a rosy future which in turn offers he and his business valuable prospects.
“Just a single painting can attract a price tag of several hundred millions of yuan,” he said.
“The size of the art market could soon catch up with the property sector.”
Dai refused to rule out the possibility of returning to real estate development, but if he did, he says it would likely be linked to the art or creative industries.
Zendai is also delving deeper into traditional Chinese medicine, to nurture what he hopes will be a new cash cow.
China’s herbal medicine market is now worth more than 400 billion yuan as people buoyed by their rising affluence become increasingly health conscious, Dai says.
“It’s my dream of rejuvenating China’s traditional medicine with scientific development.
“I have the confidence to create a business segment for traditional medicine, with a market value exceeding 10 billion yuan.
The current mainland leadership is striving to transform the economy under a new growth pattern driven by consumption rather than investment and exports.
The transition of the economic growth model has prompted thousands of mainland businesses to conduct a drastic restructuring to pursue more long-term and sustainable growth.
“The recent gains in property prices are no longer intriguing to Zendai,” Dai said.
“We will find other investment opportunities with higher return rates. Tremendous opportunities abound.”
