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Peggy Sito

'The enemy advances, we retreat; the enemy camps, we harass; the enemy tires, we attack; the enemy retreats, we pursue.'
These were  the key tactics employed by Mao Zedong  in guerilla warfare in 1928 and is now being put to use by Guangzhou Investment (GZI), the Hong Kong-listed property investment vehicle of the Guangzhou municipal government.
Applying the same principles to investing in the  property market has proven correct during the roller-coaster ride of  the market over the past two years, said He Zili,  the executive director of GZI.
'When other developers aggressively expanded by acquiring  sites in different cities at high prices two to three years ago, we did not follow,' Mr He said.
'At the time, we were criticised for being  too conservative.  But today,  after  home prices have plunged, these developers are cash-strapped and suffer from heavy financial burdens while we are well-positioned to pursue buying.'
While some developers had paid as much as 13,000 yuan (HK$14,775) per square metre for a residential site in the city, GZI's average land price  was 2,800 yuan per square metre, he said.
'Cash is king at the moment. Together with a HK$6 billion undrawn loan, we have HK$10 billion cash on hand available for investment and we are looking for residential sites in the city's urban areas with a target of buying sites that can produce a total gross floor area of more than 600,000 square metres a year,' Mr He said.
'We target urban redevelopments, distressed properties,  sites in urban areas. Overseas investors such as Morgan Stanley and Macquarie Bank are selling properties and there are many good buying opportunities in the market.'
At the top of  the company's target list is a 500,000 sqmetre site in the  Henan area. The site is occupied by a  newsprint manufacturing plant in which GZI sold its 52.55 per cent interest  to its immediate parent, Yue Xiu Enterprise, last month.
'Taking into account  the city government's policy to move all  manufacturing businesses to the suburbs, the newsprint plant will be moved sooner or later. And the site will be offered for sale,'  Mr He said.
Given its knowledge of the site, GZI would have a chance to secure it when it  was offered for public sale, he added. He expected the site  to provide a total gross floor area of 1.1 million to 1.2 million sqmetres.
Average selling prices in the area range from 12,000 yuan to 13,000 yuan per square metre.
Mr He said  GZI's prudent investment policy was  spurred by the pain  of the Asian financial crisis when the  company faced huge debt repayment pressure.
'It took us four years to restructure our assets  to repay debts,' he said.
On the market outlook, Mr He said he expected conditions to remain volatile in the short term but he was confident the market would improve in the medium term  as Guangzhou's  economy was sound.
The city  achieved 12 per cent economic growth last year and a 17 per cent  rise in  per capita income.  GZI has  a sales target of 450,000 sqmetres for this year,  hoping to generate  5 billion yuan in revenue.
'There will be 760,000 sqmetres of residential space available for sale this year. But we will not sell it all, no matter whether the market continues to fall or shows signs of recovering,' he said.
In the first 11 months of last year, the company reaped 3.5 billion yuan from property sales.
Apart from residential development, Mr He said the company  expected growth in rental properties with the  Guangzhou International Finance Centre in  the new central business district to be completed soon.



GZI guerilla tactics in property market pay off