China property manager Colour Life to deepen presence on mainland

As other mainland developers ponder their next move, with profit margins coming under pressure, Pan Jun is already reaping his harvest.

He spun off Colour Life, the property management arm of developer Fantasia, via a separate listing in Hong Kong in June. Fantasia listed in Hong Kong in 2009.

Colour Life, 50 per cent controlled by Fantasia, reported a 228.3 per cent surge in net profits last year.

Pan, the chairman of both companies, aims to finish restructuring by the end of 2017. By then, Fantasia will generate half of its profits from light-asset businesses including property management.

Colour Life bought a Singaporean property manager in November and a Shenzhen-based property manager in February. It seems the pace of acquisition is pretty fast?

Acquisitions contributed to 60 per cent of our increase in gross managed floor area last year. Organic growth, via new management contracts, was over 40 million square metres. We hope to rely more on organic growth this year, aiming for an increase via acquisitions of 50 to 60 million square metres, with organic growth to add over 60 million square metres.

What is the purpose of acquiring overseas property management businesses, for example in Singapore?

We are considering globalisation. To copy our model, we must select communities with high population density and security boundaries. We picked Singapore because we found their way of daily property management is similar to ours.

For example, the company we bought manages 29 communities in Singapore. Of course, the scale of each community is not very large, but they still have 500 to 600 households in the big ones. Like us, this company also outsources services such as cleaning, security, gardening and maintenance. What it is lacking is the value-added services we are doing now. We think we can apply our app and mobile services there.

We think our model of integrated, hi-tech and scientific property management with value-added services has great potential to grow in the future in Asia, or even globally.

How can you spread your app worldwide?

We mainly work with e-commerce platforms on the mainland. We are in talks with almost all the big names. Colour Life is creating a new O2O [online to offline] model. In this regard, Hong Kong is a big laggard. We can easily solve the language barrier as we will use local Hong Kong and Singaporean staff to handle our businesses in these cities. The Singaporean firm is still profitable, but the profit margin is thin. We want to improve that by using our value-added services via apps.

What is your plan to expand on the mainland in the next three to five years? Colour Life is in 109 mainland cities already.

The number of cities we cover is almost enough. But we need to deepen our penetration in first- and second-tier cities this year. That's why we acquired Kaiyuan International, as its businesses are mainly in prosperous eastern and southern China.

In some cities, our market share is already 3 per cent to 5 per cent. For example, in Shanghai, we cover over 20 million square meters of residential property, and the city has total residential property space of 500 million to 600 million square metres.

We aim to manage 320 million square metres of residential property by the end of this year [up from 137 million square metres a year earlier]. That will make us the world's No1 property manager.

There are media reports that China Vanke's property management business is not making a profit as the cost is too high. Are you managing communities built by Vanke?

This is exactly what I have been talking about: traditional property management firms must change.

Three years ago, I asked what would happen if developers wouldn't be able to make hefty profits any more and stopped subsidising their own property management teams - how would such businesses survive? Now, it's happening.

Mainland developers are suffering a squeeze in their profit margins, and restructuring won't be easy.

We started five years ago and this year is key to Fantasia's transition from a developer to a comprehensive community service provider.

We have also established other new business segments, such as financial services and non-residential property management.

Our financial services business has a team of 900 people and has broken even after two years. It's not easy.

Colour Life posted stellar performance. But Fantasia's is not so good. What's your opinion?

I think it's not bad, given that sales fell for the whole industry last year and profit margin dropped. By the end of 2017, I would like to see equal contribution to Fantasia's profits from development business and light-asset segments. By then, our restructuring will be successful. You will no longer be able to call us a property developer.