Swire Plans to Add China Land as Local Rivals Face Tightening

Sept. 23 (Bloomberg) -- Swire Pacific Ltd., the biggest developer in Hong Kong’s Island East district, plans to add projects in other parts of China as local rivals face credit tightening.

“We’re looking and seeing what opportunities are there,” Martin Cubbon, chief executive officer of Swire Properties Ltd., the group’s real estate unit, said in an interview with Bloomberg Television in Guangzhou today.

Swire in July sold the Festival Walk mall in Hong Kong for $2.4 billion, the biggest transaction for the company, to help fund the five projects it is developing in Chinese cities including Beijing and Guangzhou. The group said yesterday it’s planning to spin off its property business, a year after shelving an initial public offering of the unit.

Chinese regulators told banks to tighten lending for real estate on concern credit risks will increase as the impact of government curbs deepens, a person familiar with the matter said last month. Lenders were told not to extend the maturity of loans to developers, not to grant new credit to help repay maturing debt, and to set higher standards on loans for commercial properties than residential, the person said.

China’s tightening measures “probably does give us a little bit of an advantage,” said Cubbon. “There are still plenty of well-capitalized and strong residential players on the mainland. As you know, most Hong Kong developers are extremely well capitalized and right now that’s obviously an advantage, but I don’t think it’s an overwhelming advantage.”

Less Debt

Builders in Hong Kong hold far less borrowings than other Chinese developers following a two-and-a-half-year property boom in the city of 7.1 million people. The top 60 developers in the city have an average debt-to-common-equity ratio of about 50 percent, compared with the average 150 percent of counterparts in other parts of China, according to data compiled by Bloomberg.

Swire’s properties in China include the Sanlitun Village retail complex in Beijing, the 99-room luxury hotel Opposite House in the capital’s Chaoyang district and the Beaumonde Retail Podium in the southern city of Guangzhou. It is building five projects with a total gross floor area of 12.9 million square feet.

“We’re in an opportunistic mode,” said Cubbon. “Having five projects may mean we’re not quite aggressive in buying right now. But for the medium term we certainly are.”

To contact the reporter responsible for this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net