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WorldPosted at: Aug 28 2015 12:47AM


Chinese developers strike gold with premium concierge services

* Services range from beauty treatments to wealth management * Developers enjoy "last-mile advantage" from gate to lift * China Vanke among firms looking to join spin-off trend By Clare Jim HONG KONG, Aug 27 (Reuters) When Chinese developers started offering in-house services such as beauty treatments to boost the value of their properties three years ago, few expected the sideline to become one of their fastest-growing revenue streams in otherwise tough times. What began as something of a gimmick to attract middle-class buyers with premium concierge perks has blossomed into a new financing platform, with developers rushing to spin off their management units to unlock their value. Traditionally, Chinese developers offered little more than security and maintenance services at their residential projects, but more and more apartment towers now offer bonuses like in-house takeout and grocery delivery, tour reservations and even personal financial products. "Two, three years ago there was no problem with selling any new projects even in the third- and fourth-tier cites, so people didn't really care about services," said Peterson Liang, deputy executive director of Colliers International Real Estate Management Services in Shanghai. "But today sales are not as good and there's more competition, so there's a need to enhance after service." Top developer China Vanke is now looking to join the growing list of its peers that have sold their one-stop shop management businesses following the successful listing of Fantasia Holdings' management unit, Colour Life Services. Colour Life's shares had soared 230 percent nine months after their listing in June last year, and even with the turmoil that has recently battered Chinese markets they are still about 43 percent ahead. While management services provide only a fraction developers' of total revenue, any new income sources are welcome as the traditional real estate sector has struggled in recent times with high land costs and excess supply. Developers make an income from the services by charging commission fees from outside contractors. WANT FRIES WITH YOUR CONDOMINIUM? Developers call it the "last-mile advantage", the distance from the gate of the housing complex to the elevator that outsiders such as delivery staff are not allowed to enter for security reasons. It's here, it turns out, that developers can make money by offering in-house services directly to residents or, more commonly, charging commissions from third-party providers. "Working with third-party providers saves developers a lot of labour costs because they don't need to keep staff on-site to do repairs, for example. Even better, they can charge the provider to do that work for their tenants," one developer said, requesting anonymity as he was not authorised to speak to the media. Margins vary depending on the service and the company's accounting method. Color Life's gross margin was 73.9 percent in the first six months, while China Overseas Property Holdings' was 19.2 percent in the first five months. Country Garden, China's sixth-largest developer by sales, saw its revenue from property management soar 86 percent in the first half from a year ago, and said it expected the segment to continue to drive profit in future. Even so, it still only accounted for 2 percent of its total revenue. Together with smaller peer CIFI Holdings, Country Garden is in talks with financial advisors about a potential listing of its management unit. State-owned China Overseas Land & Investment (COLI) is also jumping on the bandwagon, submitting a listing application to the Hong Kong stock exchange last month. China Vanke is setting up a property management unit which it said it would spin off eventually, without providing a timetable. Guangzhou R&F Properties last week said it was exploring similar options. BENDING OVER BACKWARDS Analysts said China's recent stock rout would not affect such plans as the units were relatively small. "Even after the market turmoil COLI's still valued at HK
200 billion (
25.80 billion), while its spinoff unit is estimated to be only HK
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