Yuzhou Properties keeps focus on profits, shuns expansion

Small as it is, mainland developer Yuzhou Properties prioritizes maximizing profits rather than aggressive expansion, company chief financial officer Chiu Yu-kang said.

“The key is to buy cheap land and cut financing cost,” he told South China Morning Post in an interview.

The company last month issued US$250 million five-year senior notes, before the cost rose possibly rises further on expectations of an interest rate rise in the United States.

“The interest rate of 9 per cent is higher than our average overseas funding cost of 8.5 per cent, but the timing is crucial,” he said, adding that financing cost in 2015 will be kept at par with last year, as expensive maturing debt issued in 2012 will be refinanced later this year at an interest rate expected to be higher than what it is now.

Yuzhou Properties has three ways to cut land costs. They are: bid when others retreat, help local governments clean up raw land and acquire sites from overseas Chinese who bought them more than 30 years ago.

It won the bid for a 55,017 square metre site in suburban Jiading district of Shanghai at the floor space cost of 10,405 yuan per square metre in July 2013, when China ran into a credit crunch. A few months later, neighbouring parcels were sold at 18,000 yuan per square metre.

In Quanzhou of Fujian province, the developer invested 200 million yuan to help local government clean up a 1.3 million square metre site and then get the parcel at the floor space cost of 377 yuan per square metre, versus the market price of over 1,000 yuan per square metre.