Gemdale still seeking chance for HK listing

BEIJING - Gemdale Corp, one of China's largest property developers, will continue to seek opportunities to float its shares in Hong Kong as the platform for its commercial property business, President Huang Juncan said.

"Compared with the domestic capital market, Hong Kong is more mature and transparent," Huang told a group of reporters over the weekend. "And we've been striving for a listing on the Hong Kong bourse."

The company, which was listed on the Shenzhen Stock Exchange in 2001, failed in an attempt to carry out a back-door listing in Hong Kong by acquiring Chi Cheung Investment Co Ltd from Chinese Estates Holdings Ltd.

On June 30, Gemdale said that the wholly controlled subsidiary Huihuang Commercial Ltd would buy a 61.96 percent stake in Chi Cheung for 836 million yuan ($129 million) from Billionup Ltd, a subsidiary of Chinese Estates Holdings.

"Due to regulatory barriers, the backdoor listing failed. But we'll continue to seek such opportunities," Huang said.

Gemdale's plan for a Hong Kong listing, industry analysts said, is intended to address financing difficulties for its commercial property development.

To diversify risks, the company is strengthening two business lines besides residential buildings: commercial property development and real estate financing.

"About 20 percent of our investment each year will go to the commercial property sector in the next five years, and the total assets of our commercial property unit are expected to reach 60 billion yuan by 2015," said Huang.

The current value of Gemdale's commercial property business stands at 6 billion to 7 billion yuan.

However, it takes lots of money to develop and manage commercial property, pushing more developers to seek financial channels via listings or private funds.

"Though commercial property in China's first-tier cities still has huge growth potential, the risks in second- and third-tier cities' commercial markets should not be ignored," said Sun Xin, chairman of the Go High Fund, a Beijing-based yuan-denominated private equity fund that specializes in commercial property investment.

The fund has completed four acquisitions in Beijing so far.

Besides yuan-denominated funds, foreign real estate funds are also eyeing China's fast-growing commercial real estate sector.

Wang Zhe, general manager of Tianjin-based Lecheng Real Estate Co Ltd, said a considerable number of foreign real estate funds have approached his company about the possibility of a stake investment.

"Obviously, they are betting on the huge growth potential of China's retail sector, and thus the opportunity of a higher yield from investment in commercial properties," Wang said.

The company's "Galaxy Mall" project, one of the largest shopping malls in Tianjin, has rented out more than 60 percent of its floor space and is expected to begin operations next year.

The rental take-up "exceeded our expectations, and I expect it to grow further in the second half of 2011, due to robust economic growth and the government's efforts to boost domestic consumption", Wang said.

Gu Yunchang, vice-president of the China Real Estate Association, said that as developers rush into commercial property, they need to sharpen their competitiveness by differentiation.

Wudi Group, a Suzhou-based company that specializes in the catering industry, has announced plans to expand into commercial real estate.

However, the company will retain its focus on activity connected to catering when building commercial properties.

Huang said Gemdale's commercial property business covers a wide range of activities. Besides retail development, it includes tourism real estate and retirement communities.