BEIJING (Reuters) - Beijing Vantone Real Estate Co Ltd (600246.SS) is shifting focus from residential to commercial property development, looking to the latter for higher profit margins, a top executive of the developer said on Wednesday.
Activity in the new home market is expected to decline in big Chinese cities, making commercial property look attractive for its better profits, said Chairman Feng Lun.
“Our plan is to develop commercial property on a large scale in major Chinese cities in the next five to 10 years,” said Feng at the China Investment Summit, adding that the strategy would help Vantone to become more diversified.
Revenue from commercial property now only accounts for about 5 percent of its total, but Feng said he would like the figure to rise to 30 percent in 10 years.
Vantone, which is building commercial properties in five Chinese cities, also signed a contract to construct one such center in New York that will open in 2013. The company is also eyeing cities including London and Tokyo.
Housing prices in China rose by an average 10-15 percent in the first half of 2009 despite the global downturn, with banks granting loans to developers as well as home buyers in response to Beijing’s efforts to stimulate the economy.
Bank lending hit a record high in the first half of the year, sparking concerns by the regulator about a potential spike in bad loans. Credit growth has slowed down sharply in recent months, forcing companies to seek new channels for funds.
Vanke (000002.SZ), China’s biggest developer, joined its rivals Gemdale Corp (600383.SS) and Poly Real Estate Group (600048.SS), last week in announcing a $1.6 billion fundraising plan by selling new shares.
But Vantone has no major plan to raise capital or issue new shares in the near future, said Feng, adding he wants the company to grow at a steady pace but is not looking for explosive growth.
“We will not borrow a big amount of money to make land purchases,” he said.
Editing by Ken Wills