Interview with The Place Holdings
Interview with The Place Holdings: Sustainable Growth with Omni-Channel Strategies
time to read: 13 minutes | The interview was conducted by Nico Popp on March 24th, 2021 in Singapore (SGP).
The business model
news|financial: "The Place Holdings is a conglomerate that spans real estate development, tourism and integrated media. Tell us more about the background of this business model and how the company has evolved over the years."
Behind SGX-listed The Place Holdings is the management team of The Place Investment Group, a billion-dollar PRC conglomerate known for its extensive business portfolio in cultural tourism, integrated media, real estate development and management, biomedical technology investment, and international trade.
The management team of SGX-listed The Place Holdings consists of veterans in the real estate development and media industries. Since the 1990s, we have been part of China's rapid economic growth and have built a strong track record and awards in various fields. One of our key projects, The Place (世贸天阶), a mixed-use development built in 2006, has become a well-known landmark in downtown Beijing.
The development of the company
news|financial: "Tell us more about the project and the development of their company!"
"[...] We recognized that there is a lack of business models that combine innovative business concepts, such as "new retail" solutions and omni-channel strategies, with conventional business segments. [...]" Fan Xian Yong, CEO, The Place Holdings
The Place (世贸天阶) consists of two office buildings, a high-end retail center and the iconic 250m x 30m Skyscreen in Asia. The Place (世贸天阶) offers a unique and innovative experience by combining fashion, relaxation, entertainment and culture, and continues to be an omnichannel real estate platform for the development of new retail concepts and a key driver of new consumer trends.
In 2016, we invested close to SGD$94 million in cash into the SGX-listed company and renamed it The Place Holdings. As long-term visionaries, we conducted extensive research and feasibility studies to carefully design our business model for The Place Holdings.
We recognized that there is a lack of business models that combine innovative business concepts, such as "new retail" solutions and omni-channel strategies, with conventional business segments. Therefore, we identified Real Estate, Tourism and Media as our core business segments, which also align with our core competencies and business experience. Since then, we have made significant business progress in our Singapore and China operations.
Real estate in Singapore
news|financial: "You mention it. In Singapore, you are involved in two real estate projects. Briefly outline each project, with whom you are advancing it, and why intact relationships matter when investing in Asia."
"[...] We strongly believe in the long-term potential of the Singapore property market and continue to see strong fundamentals driven by political stability, a business-friendly environment and a robust legal system. [...]" Fan Xian Yong, CEO, The Place Holdings
We strongly believe in the long-term potential of the Singapore property market and continue to see strong fundamentals driven by political stability, a business-friendly environment and a robust legal system. To deepen our roots in Singapore, we currently have two property projects in Singapore. In April 2019, we acquired a freehold property, previously known as Realty Centre, in Singapore's Central Business District for S$148 million. The property is located at 15 Enggor Street and has a site size of approximately 11,000 square feet and a maximum height of 35 stories. As the property is located in the Anson district, it is eligible for bonus land ratios ranging from 25% to 30% if a change of use takes place under the Central Business District (C.B.D.) Incentive Scheme initiated by the Urban Redevelopment Authority of Singapore in 2019.
Joint real estate project with MMC Land
news|financial: "And what about your second real estate project in Singapore?"
"[...] As MCC Land has an established track record in developing high-end property projects both in Singapore and the region, we are confident that their expertise will complement our strengths in property development and management, and create greater synergies for both parties. [...]" Fan Xian Yong, CEO, The Place Holdings
For that, I first have to describe the background. In December 2020, we entered into a strategic framework agreement with MCC Land (Singapore) Pte. Ltd. to establish a long-term and mutually beneficial relationship for residential and commercial real estate development, project management, and cultural tourism project development and management. MCC Land is part of the MCC Group, which also includes Metallurgical Corporation of China Limited, a Fortune 500 company listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange, and its subsidiaries. This MCC Group is one of the largest comprehensive engineering and construction services conglomerates in the People's Republic of China and the world.
In January 2021, The Place Holdings announced the acquisition of a 20 percent stake in MCC Land's new mixed-use development project adjacent to the Tanah Merah MRT interchange. MCC Land's bid of SGD 248.99 million won the land following a government tender that received 15 bids from various developers. The land, which is leased for 99 years, has an area of 8,880 square meters and offers the possibility of building 265 condominiums and 2,000 square meters of commercial space, with the second floor to be used for commercial purposes.
In March 2021, we also signed a shareholder agreement with MCC Land to jointly develop our new mixed-use condominium development project at 15 Enggor Street in the Anson District. As a result, The Place Holdings will retain a 51% interest in this condominium project, while MCC Land will retain a 30% interest and Sun Card Ltd. will retain a 19% interest. This is the second property collaboration for MCC Land and the Group since the signing of the Strategic Framework Agreement in December 2020. As MCC Land has an established track record in developing high-end property projects both in Singapore and the region, we are confident that their expertise will complement our strengths in property development and management, and create greater synergies for both parties.
What strong partners mean to The Place
news|financial: "What is the importance of partnering to The Place Holdings' business model?"
As we scale our business globally and enter new markets, there are various challenges and potentially uncharted territories. An experienced local business partner will know the market better and how to succeed there. This in turn minimizes the costs and risks that can come with international market expansion. Therefore, we believe that a strong relationship between business partners and absolute trust that each partner is looking out for the interests of the other will drive all parties forward. We look forward to exploring further strategic collaborations that can provide new opportunities for growth, both in Singapore and throughout Asia.
Mount Yuntai Tourist Township
news|financial: "In addition to the buildings in Singapore, you also have a 270,000+ square foot property in the planned Mount Yuntai Tourist Township, a development in the middle of a UNESCO designated tourist area. Tell us more about Mount Yuntai!"
"[...] Mount Yuntai is the sister park of Grand Canyon National Park in the USA. Mount Yuntai is located about 70 km northwest of Zhengzhou City, the provincial capital of Henan Province, and is within an hour's drive of a catchment area of 40 million people. [...]" Fan Xian Yong, CEO, The Place Holdings
Tourism has become a major factor in China's domestic economy and is a cornerstone of the government's long-term goal of creating a consumption-based economy. The emergence of an affluent middle class and the easing of restrictions on movement for locals and foreign visitors are supporting this travel boom. According to the China Tourism Academy, the Chinese tourism industry maintained its rapid growth in 2019, with domestic travel increasing 8.4% to more than 6 billion. While the COVID-19 outbreak has hindered the growth of China's tourism industry, the Chinese government is taking measures to revive the domestic tourism industry.
China's Ministry of Culture and Tourism highlighted in October 2020 that a total of 637 million visits were made across the country during the National Day and Mid-Autumn Festival from October 1 to 8, accounting for 79% of visits during the same period last year on a like-for-like basis. COVID-19 has restricted international travel but boosted domestic tourism. Mount Yuntai Scenic Area (云台山景区) is among the first in China to be inaugurated as a UNESCO Global Geopark and awarded the highest rating of "5A" for national tourist attractions by the Ministry of Culture and Tourism. Mount Yuntai is the sister park of Grand Canyon National Park in the USA. Mount Yuntai is located about 70 km northwest of Zhengzhou City, the provincial capital of Henan Province, and is within an hour's drive of a catchment area of 40 million people.
With a total area of 280 square kilometers, covering at least ten scenic spots, Mount Yuntai receives an average of seven million visitors per year and 3-day tickets are usually sold for visitors to enjoy and experience the wonders of Mount Yuntai.
Although Mount Yuntai is a tourist site with the highest "5A" rating among China's tourism attraction rating categories, there is little infrastructure such as hotels, resorts, shopping malls, etc. Therefore, there are strong prospects for the development of the tourism ecosystem in Mount Yuntai Tourist Township, where there are several plans in the pipeline and activities under construction to build theme parks, hospitality properties with unique concepts, integrated retail, commercial and residential developments, and well-being and wellness resorts.
Tourism project in Mount Yuntai Tourist Township
news|financial: "What do you plan to build there and why do you expect it to be a good business?"
Currently, we have acquired about 270,500.64 square meters of land strategically located in Mount Yuntai Tourist Township for SGX-listed The Place Holdings. The surrounding area of this land has also seen significant development, and the Group is in the process of changing the zoning of the land from commercial to residential. This will result in an increase in gross floor area and a longer lease term, allowing the real estate project to be marketed to a wider range of potential buyers. Once the necessary regulatory approvals are obtained, the Group will proceed with the development of residential buildings and thematic activities that will cater to the tourism and new retail trends in the area.
news|financial: "Your company is pursuing ambitious plans. In the past, management has emphasized that there are numerous hidden reserves lying dormant on your balance sheet. Can you give us examples of this and explain why the potential of your projects is only gradually being revealed to the market?"
"[...] There is a potential for high revaluation gains and if the land is developed and marketed [...]" Fan Xian Yong, CEO, The Place Holdings
Since injecting nearly SGD 94 million in cash into the listed company, we have continued our cautious and conservative approach. At the same time, we have placed great emphasis on sharing the fruits of our labor and creating value for shareholders.
While the surrounding area of our acquired land has also undergone significant development, the acquisition of 270,500.64 square meters of land strategically located in Mount Yuntai Tourist Township by SGX-listed The Place Holdings was made ten years ago at the same land prices. Therefore, there is a potential for high revaluation gains and if the land is developed and marketed, SGX-listed The Place Holdings will generate strong contributions and cash flows.
No fear of dilution
news|financial: "Real estate projects involve a large amount of financing. Do shareholders of The Place Holdings need to fear dilution, or how do you plan to manage capital requirements as you develop your projects? What role do partners play in this?"
"[...] Shareholders of SGX-listed The Place Holdings need not fear dilution. [...]" Fan Xian Yong, CEO, The Place Holdings
Shareholders of SGX-listed The Place Holdings need not fear dilution, as more important is the positive impact on the value of their shareholdings from our projects and pipeline plans in Singapore and China, which have the potential to create a much larger company with a higher valuation.
While the real estate projects require significant funding, most of it will be provided through bank financing, and as the real estate projects reach certain construction milestones, there will be cash flows generated by real estate buyers. If needed, cash flows from our other service-oriented businesses will provide additional support.
It is also important to note that SGX-listed The Place Holdings is affiliated with The Place Investment Group, a multi-billion dollar PRC conglomerate known for its extensive business portfolio in tourism, media, property management, biomedical technology investment and international trade. Our partners are also an important factor, as we share the risks and rewards of each project and bring our respective strengths and capabilities to maximize the business potential of each project.
The Place and the media business
news|financial: "Another of your mainstays is the media business. This primarily involves outdoor advertising. How does this business segment complement the real estate and tourism business?"
"[...] Our strategy therefore focuses on developing innovative business concepts, such as "new-retail" solutions and omni-channel strategies, and integrating them into the real estate and tourism business. [...]" Fan Xian Yong, CEO, The Place Holdings
The real estate and tourism business has typically been developed and managed in a generic way with traditional concepts. With our experience in managing and operating the digital canopy of The Place (世贸天阶) in Beijing, onto which media content can be projected, we have been involved in various marketing and branding campaigns that are influential and innovative. We have seen how innovative ideas and digital concepts can influence consumer behavior, improve customer experience, and create new value propositions and opportunities for traditional businesses.
Our strategy therefore focuses on developing innovative business concepts, such as "new-retail" solutions and omni-channel strategies, and integrating them into the real estate and tourism business. The continued success of The Place (世贸天阶) is a good example of how digital solutions and omni-channel strategies can create a clear differentiation of strengths and assets in an otherwise traditional and competitive business environment.
The Place Holdings as a dividend stock
news|financial: "You manage without debt capital and point to a strong financial foundation. At the same time, you emphasize the great potential of your new businesses to generate cash flows. Are you an upcoming dividend stock?"
In addition to creating share value appreciation through long-term, sustainable growth, we strongly believe that dividends are another direct way to reward shareholders for their support and confidence. As such, we may be evaluating the possibility of instilling a dividend policy moving ahead.
Role of the mall “The Place”
news|financial: "You carry the name of The Place, a well-known mall in Beijing, but it is not part of your portfolio. But it is close to your company. Please explain this connection..."
"[...] we may look at the possibility of acquiring The Place (世贸天阶) as part of the business portfolio [...]" Fan Xian Yong, CEO, The Place Holdings
The naming of SGX-listed The Place Holdings reflects our growing business ambitions to build real estate landmarks and strong cash-generative businesses in Singapore and Asia. While the property market in China is highly competitive, the growing success of The Place (世贸天阶) is a testament to the vision and success of the management team. This has undoubtedly sparked many business inquiries and opportunities to replicate similar concepts in other geographic markets.
In order to leverage such opportunities to scale and replicate the concept of The Place (世贸天阶) across Asia, we may look at the possibility of acquiring The Place (世贸天阶) as part of the business portfolio of SGX-listed The Place Holdings so that we can strengthen our branding and showcase the direct association of ownership.
What the company hopes to gain from listing in Germany
news|financial: "You have now been listed in Germany. What do you expect from this listing and what role should The Place Holdings' shares play in the portfolio of your new German shareholders?"
"[...] We see ourselves as disruptors of conventional business models [...]" Fan Xian Yong, CEO, The Place Holdings
As a major player in the European economy, Germany is a destination for many domestic and foreign investors, including private equity firms, public investment companies and retailers. As such, Germany has developed a well-established financial market with sophisticated equity investors.
We see ourselves as disruptors of conventional business models and have experienced first-hand how this creates new value propositions for stakeholders. Our approach is therefore to implement proven, innovative business models and concepts to maximize the potential of our business activities in Asia and create new economic opportunities for the markets in which we operate.
We are heartened by the investors’ interest in Germany and we hope to attract more foreign investors who want to invest in a high-growth, innovative and diversified company that has a direct linkages to the growth opportunities in Asia, especially in China.
news|financial: "Thank you very much for talking to us."