Metro malls offer rich returns for Golden Wheel Tiandi
Wong Yam-yin, the founder and chairman of Golden Wheel Tiandi Holdings, arrived from Indonesia in 1980 to set up an office for his family’s hardware trading business. He soon found that most entrepreneurs had gained their wealth from investing in real estate. Inspired by their success, Wong started investing in the property market.
In 1994, he founded Golden Wheel to invest in mainland property as demand for housing soared in tandem with the nation’s economic growth. To step up expansion, Wong listed his property business on the Hong Kong stock exchange in January 2013.
With 30 years of experience in business management, Wong is responsible for the company’s overall strategy, business and investment planning.
How did you get into mainland property investment?
I established an extensive business network while trading on the mainland for more than three decades. We started with a small project in Nanjing and gradually expanded into Changsha, Wuxi, Zhuzhou and Yangzhou.
Despite keen competition from major developers, how did your company expand its land bank?
We don’t compete with big companies by joining bidding wars at land auctions. Instead, we focus on projects near transport hubs. Since 2013, we have taken advantage of falling land prices and secured seven plots to expand our land bank by 174 per cent to 972,000 sq metres. Most of the land we bought is located near metro stations, which we believe are less risky investments.
What type of projects does the company plan to build on these sites?
The most desirable design is 50 per cent for office space, 30 per cent for serviced apartments or budget hotels and 20 per cent for retail use. We keep the retail space for leasing and sell the rest. For instance, our residential-hotel project Changsha Golden Wheel Star Plaza could yield a gross floor area of 167,182 sq metres. We received lots of inquiries expressing interest in buying the hotel. The whole project is expected to be completed in December 2017.
How has the company’s leasing business in metro stations fared?
We bid for the leasing and operational contracts of shopping malls. We have secured contracts for 13 malls in Nanjing, Suzhou, Changsha and Wuxi. We operate and manage seven malls. Among them, Nanjing Xinjiekou mall is 100 per cent occupied, with a scheduled 10 per cent increase in rents on renewal of leasing agreements. The remaining malls have 70 per cent occupation rates since opening a few months ago.
What is the rental growth?
The Nanjing Xinjiekou mall is the most successful as its annual rental income doubled to 10 million yuan (HK$12.4 million) in three years. Other malls are faring more or less the same.
What are the tendering procedures for metro malls?
Previously, metro companies would only award contracts to the highest bidders. However, some malls performed badly because of a lack of experience in management. There were also those who bid aggressively for the contracts but ended up in the red. Some even walked away from the deals.
Learning from their mistakes, most metro operators now also consider the track records of the bidders. They will visit our malls to see how we are doing in terms of tenant mix and shoppers. Because of our success in Nanjing, we are often invited by different cities to bid for their mall projects.
Are there many competitors when you bid for metro projects?
Of course, every project will have eight to 10 competitors.
How long are the leasing contracts?
Most are for 10 to 15 years.
Will the fast development of e-commerce affect the company’s retail business?
The popularity of online shopping has limited impact on our business. Most of our retail space is leased to restaurants and fast fashion retailers such as H&M. We don’t have any tenants selling luxury items. At our malls, most tenants offer daily necessities and fast food.
What is your view of the mainland property market outlook?
Nanjing is one of our biggest investments. We do not see an overbuilt problem in the city. Unsold housing inventories could take nine to 12 months to clear, in line with the normal 12 to 15 months.