Beijing North Star, a Hong Kong-listed and Beijing-based developer, plans to step up its property investments in second-tier cities this year to offset a possible slowdown in big cities.

The strategy was announced yesterday, as was the company's annual earning report, which recorded a 17.2 percent rise in net profits last year over 2006. The total amounted to 463 million yuan.

The developer pulled in a total of 3.11 billion yuan from property contracted sales last year, banking an operating profit of 677 million yuan - 68 percent more than in 2006.

Beijing North Star Chairman He Jiangchuan said that a more diverse project mix, improvement in project integration and good product positioning were among the group's strategies to offset the effects of the central government's new policies.

The chairman said some property developers, especially the ones without sufficient capital, are starting to feel the pinch of the government's tightening measures. "These policies will continue this year, making it much more difficult for smaller developers," he said.

Some mainland residents, however, may benefit from cheaper housing prices.

The central government has been aggressive in capping the rapid growth of the booming property market to stave off an asset bubble.

Tighter loan regulations, as well as taxes on capital gains, have dried up the bank accounts of smaller developers. With no capital to invest with, they can't purchase more property to develop.

"We will expand our focus to second-tier cities ... as another strategy to stave off the potential negative impact brought on by the tightening policies," He said, adding that he believes the harsher conditions may lead to company mergers and more cooperation between developers this year.

The chairman said that his company will seek to raise capital through various channels.

"Our target is to raise about 2 billion to 3 billion yuan in additional funding this year," He said, specifically mentioning bank loans and partnerships as possibilities.

The property developer currently has a land bank of 7.5 million sq m and its total assets are worth 21.9 billion yuan.

Being one of the developers of the Olympic venues, the group has invested 8 billion yuan in two major projects - the Olympic Media Village and the National Olympic Convention Center.

He said that since October, the Olympic Media Village had already sold a total of 1.14 million sq m.

Following the annual results, share prices of Beijing North Star inched up 0.79 percent or HK$0.03 to close at HK$3.81 per share yesterday.

(HK Edition 03/07/2008 page2)