Joy City Property eyes expansion in China's top-tier cities

Joy City Property, the Hong Kong-listed property arm of Cofco, mainland China's biggest food supplier, is looking for opportunities to expand into more top-tier cities while disposing of non-core assets to increase return.

Chairman Zhou Zheng told the South China Morning Post on Tuesday that his team was scouring a few second-tier cities including Wuhan and Xian, with clearer plans in Shenzhen and Nanjing.

"We want to deliver on our promise of opening one or two big mixed-use projects each year," he said after a shareholder meeting in Hong Kong to approve its 43.76 million yuan purchase of a site in Hangzhou.

That will be its eighth Joy City-branded project, which mainly consists of a shopping mall, office complexes and residential buildings. More than 60 per cent of the mixed-use projects are for sale to bring quick cash flow, with the company holding the shopping malls to generate steady rental income.

Joy City bought assets worth HK$12.5 billion from its parent last year, including six shopping malls targeting mainland China's rising number of middle-class families. It will open a seventh in Chengdu later this year. The mall in Hangzhou is scheduled to open in 2017.

The company is also open to acquisition opportunities in undeveloped sites and existing shopping malls.

"There are a lot of chances now," Zhou said. "Quite a few companies approached us last year. But we are picky in terms of cities, local residents' purchasing power and competition in the neighbourhood."

To finance the expansion, Joy City issued US$800 million of offshore bonds in November and is in the process of a HK$6.36 billion rights issue, scheduled to finish next month.

The company intends to control its net gearing within 65 per cent. It will announce last year's earnings next week.

As the majority of its existing debts are denominated in yuan and offshore funds are still cheaper for it than onshore loans, the company plans to issue more bonds offshore this year and will also consider syndicated loans.

Meanwhile, the company will continue to sell non-core assets, including the Fraser Suites Top Glory Shanghai, after it sold the Shanghai Cofco Tower for 340 million yuan to a domestic buyer last year.