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Peggy Sito

Toymaker flourishes where other real-estate players fail

For many veteran Hong Kong property investors, the market crash in late 1997 was the start of a nightmare which saw their wealth vanish before their eyes. But for Francis Choi Chi-ming, it was the year he found fame and fortune in the real-estate sector.

The 56-year-old 'king of toys' - whose company makes diecast Nascar collectibles and licensed dolls including Harry Potter and Bratz  - realised there was money to be made in property.

While others were busy unloading their investments to meet loan commitments, Mr Choi was lining up his first deal - to buy the commercial tower Tsuen Wan Hover Plaza from his friend Lo Yuk-sui, chairman of Century City International and Paliburg Holdings, for $200 million.

This investment was part of an overall plan, Mr Choi said.

'Every economy has its cycle. Sometimes it's four years and sometimes it's six years. The last up cycle [from 1987 to 1997] was too long. I felt something was wrong,' he said.

He had been watching the property market closely two years before it collapsed, waiting for the right moment to invest.

Since that first deal, Mr Choi has actively expanded his property portfolio, accumulating commercial premises, luxury residential flats and a hotel.

He has about 30 properties in Hong Kong worth an estimated $5.6 billion - a 60 per cent book profit on the $3.5 billion he paid for them. His most recent purchase was six houses in Kau To Shan, near Sha Tin, for $105 million last month.

'One of my favourite purchases was the $460 million acquisition of The Hacienda, which overlooks Repulse Bay beach,' Mr Choi said.

The 33-house development was acquired shortly after the September 11 attacks from highly geared Sino Land, chaired by one of the city's most optimistic property bulls, Robert Ng Chee-siong. At the time, the property market was down to one of its lowest points in the past decade.

Mr Choi said the price of the deal was 10 per cent lower than bank valuations.

'I have not had any losses in my property investments. That's a sure-win rule to follow - you must calculate the cost of the asset very carefully and you must be patient,' he said.

He spent a year negotiating with the owner of Plaza 2000 in Causeway Bay four years ago.

'I am a manufacturer. I understand cost control is the key to success. The same rule applies to property investments.'

As an example, he cited his purchase of commercial project Energy Plaza in Tsim Sha Tsui in July 2001 from joint owners Sino Land, Kerry Properties and the Chinachem Group for $453 million.

'When I calculated the cost of the building, I imagined it was bare public land offered by the government, how much the land cost and how much I would pay for constructing the same building on the site.'

Mr Choi calculated the accommodation value of the building was about $2,700 per square foot. To make a 'sure win' purchase, 'I offered them $2,300 per square foot', he said.

The building's estimated value now is $5,000 per square foot.

Mr Choi believes everyone should learn from their mistakes.

'I had no experience when I made my first investment in Tsuen Wan Hover Plaza. Today, I think I paid [Mr Lo] $20 million more than the property was worth at the time,' he said, laughing.

But since those early days he has had plenty of time and opportunities to hone his buying skills.

Last August, Mr Choi bought the 400-room Regal Oriental Hotel next to the former Kai Tak Airport for about $350 million, again from Mr Lo.

The hotel, which had an estimated value of $410 million in 2002, is expected to be worth more as more mainland shoppers flock to Hong Kong.

Mr Choi said he had no intention of making money from Mr Lo.

'He [Mr Lo] is an old friend. I will sell it back to him if he wants it.' he said.

Like the first generation of industrialists in Hong Kong, Mr Choi earned his money the hard way, working from an early age. As a child, he remembers being too poor to have manufactured toys. He set up his toy-making company, Early Light Industries, when he was 25.

The company has now expanded and has been renamed Early Light International Holdings. Turnover last year was $3 billion.

The care he takes with his property portfolio obviously stems from his experience in toy manufacturing.

With more than 50,000 staff working in plants in Sheung Shui and Shenzhen, Mr Choi is conscious of the need to be careful.

'I cannot afford to make risky investments, not for my sake or for the sake of my staff, who depend on me for their living.'

In his leisure time he likes to feel the wind in his hair. He has a collection of more than 30 expensive cars worth more than $40 million, including the latest Pagani Zonda C12S, valued at more than $4 million.

He has also invested heavily in motor racing.

In 1992, he bought a 10 per cent stake in New York-listed Action Performance Companies, which has licences to make motor sport collectibles and memorabilia related to Nascar.

Early Light has exclusive rights to make Nascar replicas for Action Performance, generating an annual turnover of $800 million.

Mr Choi said his investment in Action Performance made him a handsome profit, which he invested in the Hong Kong property market. However, he said it was becoming more difficult to find good opportunities as the market recovered.



Toy king makes fortune in real estate