Last month, China’s surging economy racked up another surprising achievement: The main index of the Shanghai stock exchange passed 6,000, a five-fold increase in just two years.
That surge meant that China now has eight companies worth over $200 billion, more than any other country. The country’s first-half trade surplus of $115 billion was 85 percent higher than the surplus for the same time last year, its sharpest rise ever.
Given these gains, it’s no surprise then that China’s development market is also electric and a high-speed ticket to wealth, even if new home sales have slowed down in the country (see International Briefs). The country’s industrial heartland is experiencing the kind of bullish development activity that is nearly the opposite of the sluggish performance in some parts of the United States. Prices are rising in the market overall, and newspapers there are alive with stories of rookie investors making windfalls by flipping properties.
Indeed, according to Forbes Magazine, the fortunes of five of China’s 10 richest individuals were either entirely or partially earned through real estate development. The latest real estate tycoon is Zhang Xin.
Xin attended Cambridge University before landing in New York at Goldman Sachs, the investment bank. In 1997, together with her husband, Pan Shiyi, she founded Soho (for “small office home office”) Properties. Last month, Soho raised $1.7 billion on the Hong Kong stock exchange, the same amount that Google raised in its celebrated initial public offering back in 2004.
Soho Properties is a Beijing-based firm known for design-conscious high-rise communities that draw some of their influences from similar buildings in places like New York and Miami. For instance, Soho were the first builders in China to create apartments with floor-to-ceiling windows.
As opposed to slapdash developers who saturate small plots with massive projects, Soho is known for developing large residential projects built on a human scale, observers said. Their design for Commune by the Great Wall, a planned community outside Beijing, won a special award at the Venice Biennale in 2002.
Another innovation, learned apparently by observing American buildings, is including street-level retail in their residential projects. Soho Properties is said to have been the first developer to see the value of including Starbucks franchises in their buildings as a lure to draw tenants.
Soho isn’t the only Chinese real estate development company emulating American design. Billionaire Zhang Yu Chen made his fortune in Beijing property by building luxury subdivisions modeled on California ranch-style homes, which he sold for over $2 million each. For his own home, Yu is spending $300 million on a replica of a French chateau.
Several New York City investment banks have become major players in China’s real estate market. Goldman Sachs was one of the banks that took Soho public.
Meanwhile, Merrill Lynch, Citigroup and Morgan Stanley have all emerged as major financial backers of Chinese property developers.