BT : Second-tier cities offer growth potential

Business Times - 04 Mar 2010

SINGAPORE INTERNATIONAL
Second-tier cities offer growth potential

That's why Xian is Mapletree Investment's choice

By CHUANG PECK MING

WHERE does one invest in China, which is such a vast market? One of Mapletree Investment's strategies is to focus on second-tier cities with good growth potential, where it can find better value in real estate. And where growth has not fully taken off.

The idea is to ride on the growth of these cities in the next decade, says Loh Shyh, the Singapore-based company's chief executive officer.

Xian meets many of Mapletree's criteria. Mr Loh says the city, away from China's coastal regions, has a vibrant economy and a big population of 8.4 million people who are growing richer.

And it has been singled out by the government for the next frontier of China's development. So foreign investments in the city get generous government backing and incentives.

The central government is already pouring money into infrastructure and education there to build the pool of low-cost but educated workers for Xian's development.

'There is therefore demand for good quality residential, retail business and other lifestyle and entertainment properties that will meet their needs for a modern, convenient lifestyle,' Mr Loh says.

Mapletree, which described itself as 'a leading Asia-focused real estate capital management company', isn't interested just in retail and residential properties. It's also looking for land and sites for logistics, business parks, industries and offices.

The company's first investment in Xian was a $17.8 million acquisition of a logistics distribution centre in March 2007, which has been named Mapletree Xian Distribution Centre.

Four months after, it committed itself to a 200,000 square-metre 'integrated mixed-use development comprising four luxurious residential towers with 1,368 units and integrated with a retail component'.

The development is called 'Future City' and the retail component is a replica of Mapletree's VivoCity in Singapore. VivoCity Xian, about 62,500 sq m spread over four levels, is due to open in December this year.

'Future City was created based on Mapletree's vision of a vibrant, cosmopolitan hub for work, living and play, featuring a large retail mall to cater to today's shopping demands, as well as modern apartments to supplement the growing needs of residents and visitors,' Mr Loh says.

The investment in Future City is US$148 million.

'Mapletree expects revenue contributions from its two projects to increase as occupancy rises for the Mapletree Xian Distribution Centre and construction of Future City is completed by the fourth quarter of 2010,' Mr Loh says.

He noted that China's commitment to developing the western regions has drawn a rising international presence in Xian.

'Xian is a modern city undergoing rapid urbanisation, with its young and dynamic workforce growing in affluence. There is therefore demand for good quality residential, retail, business and other lifestyle and entertainment properties that will meet their needs for a modern, convenient lifestyle.'

Mr Loh says Mapletree is still exploring more opportunities in Xian.

'Doing business in China, as in any foreign country, requires intimate knowledge of the local business landscape, rules, regulations and nuances,' he says.

'As real estate is a local business, it is imperative that we have a local physical presence in each city where the projects are in order for us to get close to deal flows and services of our customers.'

Mapletree currently has three management offices in China: Shanghai, Beijing and Guangzhou, apart from project companies in Tianjin, Foshan, Wuxi, Xian and others.

Its total headcount in China is 120 and its staff is 'growing by the day'. Mapletree has 52 staff based in Xian.

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