Diversifying China Vanke eyes SOE and logistics assets

PUBLISHED : Thursday, 10 April, 2014, 1:01am
UPDATED : Thursday, 10 April, 2014, 1:01am

China Vanke, the mainland's largest developer by sales, is eyeing equity stakes in the property arms of state-owned enterprises and exploring other sectors such as logistics, chief executive Yu Liang said yesterday.

The central government is quickening the pace of state enterprise reform to improve the economy and has taken a few key steps, including the injection of assets of conglomerate Citic into its Hong Kong-listed unit.

"China is encouraging SOEs to sell their businesses in competitive industries to private investors and we find ourselves in a vantage point in such mixed-ownership reform," Yu told a property forum. "We are in talks with several institutions about this and are willing to take big steps in terms of acquisitions or equity stake investment."

He did not provide further details.

The central authorities have in recent years urged state firms to quit non-core property business, but progress has been slow. However, the pace quickened in recent months in Beijing, Shanghai, Nanjing and other cities.

Yu said Vanke's overseas expansion - so far involving four projects, in the United States, Singapore and Hong Kong - was generating ideas for its mainland business, including logistics facilities, at a time when there was oversupply in the office and retail property markets.

"China's logistics market is just taking off and the fast development of e-commerce, due to the lack of a well developed retail network, will generate huge demand for warehouses," he said, adding that Vanke was looking to increase the proportion of overseas projects in its development portfolio from 1 per cent now to 10 per cent in five years.

He declined to confirm earlier reports citing executive vice-president Mao Daqing that the company was talking to US private equity giant Blackstone Group about a real estate fund to invest in logistics properties.

Yu said one thing Vanke had learned from overseas partners was the need to maximise profitability through financial arrangements.

"We had no interest in logistics in the past, as the profit margin looked low to us. Then we found it uses financial tools," he said, without elaborating.

That discovery had broadened Vanke's business scope, and it now intended to build properties that people used, instead of just the ones they lived in, Yu said.

Diversification is an industry trend, as government curbs have reined in demand for housing while the soaring cost of land and labour erodes profitability. Residential developers have been investing in shopping centres, offices, hotels and even non-property businesses such as mining.