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)