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Developer confident of $1.47b Guangdong resort project

By Nie Peng (chinadaily.com.cn)
Updated: 2008-09-25 10:56

As investors gradually lose confidence in the Pearl River Delta areas in a sluggish real estate market, a Shenzhen-listed developer is pushing its 10-billion-yuan ($1.47 billion) investment plan to transform a barren beach into a world-class resort.

Liu Shichun, general manager of the Financial Street Holding Company said the company's decision-makers expected the current adjustment of the property market to last some two years.

"But the adjustment shouldn't be drastic", Liu told the Caijing magazine recently.

"The core product of Financial Street, commercial property, won't suffer a great impact. On the contrary, certain areas in commercial realty can even get a boost. Company decision-makers held that many rare resources would only emerge at such a time."

The Beijing-based company launched the largest investment project in its history, the Golden Bay project, in Xunliao Bay of Huizhou, Guangdong province in 2005.

Caijing said the project is still in the infrastructure construction phase after almost three years and facilities for daily use, such as water, electricity and gas, are not likely to be in place until 2010. So far, the developer has invested more than 1 billion yuan .

Lai Youqing, general manager of the company's Huizhou subsidiary, said the project would occupy a total area of some 24 square kilometers with 10 square kilometers for construction use.

Upon completion in 2015, Golden Bay will be home to three or four five-star hotels and a super five-star hotel as well as golf courts, regatta facilities and holiday villas. Several hotel apartments will also be available and a beach town that can accommodate 75,000 people will welcome tourists from around the world.

Liu said resorts were high-end tourism projects and the location was key to success.

"Timing is important for residential real estate projects, but commercial developers depend on selecting the right location plus good operations (to be successful)."

According to Lai, the Sheraton Huizhou Resort, the first five-star hotel of the Golden Bay, was inaugurated in June together with two hotel apartments. He said operations there were going well.

The apartments, carrying a price tag of 8,000 yuan per square meter on average, had already sold out and 60 percent of the Sheraton rooms were occupied, said Lai.

In recent years, large developers have spent generously to buy land and invest in tourism resorts or regional property projects.

However, the downturn in the property market has aroused doubts about their ability of sustainable investment.

In a recent move to ease its developing fund shortage, the Hong Kong-listed Agile Property Holdings sold part of its stake in a property in South China's Hainan Province.

But according to Lai, Financial Street has sufficient funds as it raised about 8.2 billion yuan through issuing new shares on the stock market in January.

Lai said 3.5 billion yuan of the funding would be spent on the Golden Bay project.

Financial Street saw a surge in cash despite a slump in sales in the first half of this year according to the developer's interim report. The company has 8.8 billion yuan in cash, Caijing reported.

The central bank cut the benchmark lending rate by 0.27 of a percentage point to 7.2 percent from on September 16, the first such move since 2002.

A rate change might not bring more wealth to property developers but can boost industry confidence, analysts said.

Some developers have welcomed the move as the market undergoes a correction and many are strapped for cash.

Property prices in 70 major Chinese cities rose to 5.3 percent year-on-year in August from 7 percent in July, the National Development and Reform Commission (NDRC) said last week. The growth rate has dropped for eight months in a row this year, showing signs of nationwide decline after a two-year surge.

New residential property prices rose 6.2 percent year-on-year in August, the NDRC said. Non-residential property prices grew 4 percent last month, down 0.9 percentage points from July.