Talk less and listen more. That’s the promise China’s doyen of
real estate developers made to Beijing Review when he hosts
the “Green Agenda for Real Estate Industry” at the forthcoming Boao
Asian Forum.
Pan Shiyi, the legendary and often controversial figure in
China’s real estate market with film star-like celebrity status, is
never far from the media’s attention. In less than a year that he
has been writing his own blog online, the hit rate has rocketed to
over 20 million. His speeches and comments get people fired up,
often critically, whether the topic is real estate or anything
else.
He was born to be in real estate and has the touch of a Chinese
Donald Trump when it comes to developing property. By making minor,
but very innovative changes to building structures he is known to
sell apartments with prices over 30 percent higher than the average
prices, when all around him other real estate developers are
battling to make sales.
While other real estate developers were engaged in heated
arguments with buyers about quality problems, Pan raced ahead of
the competition with the idea of “refunding unconditionally” twice.
For the first time, buyers can get bank interest refunded; for the
second time, buyers can get 10 percent of the annual interest rate
paid back. He has made the refunding procedures simple-interested
parties sign a contract and Pan’s company does the rest. His
competitors blame him for spoiling industry orders, yet Pan’s sales
staff have dozens of prospective clients on their books and his
apartments can be sold out in days.
Pan regards a leasing service as the “ultimate service” a real
estate developer can provide. In his eyes, the real value of an
apartment does not lie in its sales value, but in its lease market.
The sales price of an apartment may be influenced by various
factors, but the leasing price can truly reflect its value. Pan’s
sales representatives are able to analyze clearly the leasing
returns for buyers.
While he may not yet be the richest kid on the block in terms of
real estate tycoons, he is extracting maximum profits from this
market, something his SOHO China Ltd. bears testimony to.
Green solution
Pan’s innovative spirit has now spilled over into the area of
environmental protection.
“We should not complain about air pollution and global warming
on one hand, while on the other do things to pollute our air,” he
said, having put his money where his mouth is by avoiding driving
his car for daily business. According to him, environmental
protection is a concrete reflection of a real estate developer’s
social responsibility, even though it is currently a new topic for
the industry.
“Statistics show that in some developed cities, energy
consumption of buildings accounts for more than half of that of the
whole city. Thus, whether a building is energy conservative has a
direct relationship with our future energy consumption,” said
Pan.
When people talk about environmental protection and energy
conservation, they often focus their attention on
environment-friendly materials and equipment. However, Pan noted
that while materials and equipment are no doubt important, they are
only one aspect of the construction and real estate industry. “The
most important things are city planning and construction
design.”
He believes that if a city is built in a traditional way with
separate residential areas, office areas and shopping areas, at any
given time of day one area would be idle, resulting in a large
amount of space and energy being wasted. He cites Wall Street in
the United States as an example. “About 12 years ago, I went there.
The street was crowded with people at noon, but empty at night.
People working there were busy but ineffective as they had to spend
much time and energy on the crowded road, meaning cars consumed gas
and discharged pollution.” He said this is the kind of built up
area that is blatantly not energy conservative or environment
friendly.
Pan does not think much of the international norm which measures
energy conservation by the SCE (standard coal equivalent) consumed
by one square meter of building, including electric power and
heating. He said this method is inaccurate as it only evaluates the
building itself, not taking into account factors like how many
people use it, how it improves local employment, how much it
contributes to GDP growth and how much tax the people inside the
building have paid. “If we do not take factors like people, social
and economic problems into consideration, we would very likely
arrive at an absurd result. Buildings which are unsuitable for
people to live in or with no people to live in are the most
environment-friendly buildings.”
In the 1990s, Pan introduced the concept of SOHO (Small Office
Home Office) and established SOHO New Town, consisting of offices,
residences and other supporting facilities like shops, restaurants
and sports.
SOHO is a concept based on Pan’s vision of market development
trends in Beijing, which is that in the information age the
boundaries between home, office and factory are becoming vague.
SOHO New Town is characterized with simple shapes and broad doors
and windows, replacing balconies with French windows, which was
unique in Beijing at that time. Most importantly, he mixed western
construction styles with traditional Chinese styles in design, like
the current cultural atmosphere in Beijing. These buildings not
only supply flexible options for residences and offices, but are
also in line with the rapid growth of small-sized private
enterprises, which have now become the most active sector in
China’s economic development.
In the following years, Pan developed several SOHO buildings
like Jianwai SOHO, which focuses more on the entire system of the
community.
The SOHO format, which can meet various demands, received a warm
welcome from consumers. SOHO New Town, completed in 2001, was the
best selling real estate in Beijing for two successive years, 1999
and 2000.
“The basic point of real estate development is to focus on human
activities and create human-oriented rooms with complete supporting
facilities for them. Only by doing this can we construct
environment-friendly buildings,” said Pan.
Location, location, location
Undoubtedly, to real estate developers, location is the most
important factor they have to consider during their development. In
this regard, Pan has a nose for location.
More than 10 years ago, west Beijing was generally regarded as
the best place for real estate development as the financial street
and China’s silicon valley are located there. However, Pan and his
wife Zhang Xin, who is also his business partner, chose to build
their first SOHO project in east Beijing. The reason is very
simple, east Beijing is brighter at night than the west. To them,
the brightness at night is closely associated with economic
development impetus.
In 1987, 24-year-old Pan resigned from the civil service and
headed for Shenzhen and Haikou, two special economic zones at that
time. According to him, the two cities were undergoing urgent
construction and therefore bricks would be needed, lots of them. He
found work in a brick factory, rose to become manager and then
started his real estate development business with some friends.
At that time, Pan discovered that the average housing area in
Beijing was only seven square meters per person, while the figure
in Haikou was several times bigger. Using the logic that large
amount of capital was flowing into Haikou, he persuaded his
partners to go to Beijing.
After he obtained a business license in Beijing, he was made
aware of a piece of land near a subway station where he built the
Wantong New World Plaza. The project went on to be listed by
Beijing Real Estate magazine as the most outstanding real estate
project in Beijing in1994.
After Pan finished Jianwai SOHO and Guanghua SOHO, he had no
land reserves, no apartments for sales and no bank loans. His
company recently announced it would develop a 470,000-square-meter
piece of land in Sanlitun. The project, entitled Sanlitun SOHO
consisting of offices and high-level apartments, will be completed
in 2008-09 in different stages. The commercial section, with an
area reaching 120,000 square meters, will be completed by the end
of next year.
Sanlitun lies adjacent to the diplomatic quarter in Beijing. In
the 1990s, the place was gradually developed into a bar street. In
June 2004, the Beijing Government began to rebuild the area and it
gained the reputation as the best place for real estate in Beijing,
with developers clamoring to get in.?
“Sanlitun, Beijing’s traditional business district as well as a
modern place for fun, is very close to Beijing’s CBD (central
business district). In the coming two to three years, the place
will be under large scale construction. When the surrounding
projects are completed, Sanlitun will be an excellent location,”
said Pan. It is reported that the trading value for this project
exceeded that of his previous three SOHO projects.
However, while many think Pan is operating at great risk as he
will only be selling after the 2008 Beijing Olympics, he is
confident in the future of China’s economic development. “I am
optimistic with the Beijing real estate market after 2008,” he
said.
Currently, the argument on whether housing prices will go down
after 2008 is a hot issue, but Pan said he would demonstrate his
confidence through action. “Real estate is a comprehensive market
relating to a country’s political stability, security and economic
development. Taking all these factors into consideration, I think
we will have a promising future,” said Pan.?
(Beijing Review, April 20, 2007)