Excellence’s Li Says Shenzhen Office Space Can’t Meet Demand

Li Wa, chief executive officer of Excellence Real Estate Group Ltd., a Shenzhen-based developer, said the supply of office space in the southern Chinese city’s central business district isn’t enough to meet demand.

Excellence is seeking to raise as much as HK$7.8 billion ($1 billion) in a Hong Kong initial public offering, according to a prospectus issued today. The share price is expected to be set on Oct. 28 and trading is to begin on Nov. 3.

Li, who said Excellence is the biggest supplier of office space in Shenzhen’s city center, spoke to Hong Kong reporters via a videoconference from Singapore today.

The company is selling 3 billion new shares at HK$2.10 to HK$2.60 apiece. The high end of the range values it at HK$31.2 billion or 9.3 times its adjusted 2010 earnings, as estimated by banks involved in the sale, two people familiar with the plan said.

On supply of office space in Shenzhen’s CBD:

“Shenzhen has a very advanced CBD after having been developed for so many years. From 2003 till now, every year there has been a 20 percent to 30 percent growth in demand. When the high-speed train from Kowloon is ready, it will travel straight to the Shenzhen CBD. There isn’t enough supply to meet demand. There’s no other area in Shenzhen that can replace the CBD.”

On the pricing of Excellence’s shares:

“I think our price is quite reasonable; from the roadshow, investors seem to accept it. On a price-earnings basis, we have to look at the long term. China’s real estate now is similar to Hong Kong’s in the 1980s. So in the long term, the price- earnings ratio is suitable.”

On the outlook of China’s real estate:

“I am very positive on the long-term outlook of China’s real estate market. The urban population is 600 million and could reach 1 billion because of urbanization.”

To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net

To contact the editor responsible for this story: Alan Mirabella at amirabella@bloomberg.net

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