In Search of Authenticity
The PEAK Hong Kong|March 2017

Shui On Group Chairman Vincent Lo reflects on business, China's property market, the future of Hong Kong, dealing with The Donald, and the need for authenticity in tumultuous times.

Ryan Swift

A visit to Vincent Lo’s office at the Shui On Centre in Wan Chai is to take an artistic step back in time. Traditional Chinese art lines the walls. The centrepiece, located in a specially built alcove near Lo’s main office, is a large and very intricate Chinese junk carved out of solid jade. Lo himself can often be seen in traditional Mandarin collar suits, befitting his love of traditional Chinese culture.

Nonetheless, this lover of China’s artistic tradition (don’t look for Lo among the contemporary art at the upcoming Art Basel) is trying to forge an uncharted future for his company, whose fortunes are tied to the bricks and mortar world of China’s property business. In China, he sees great potential, particularly in Shanghai and Wuhan (tier one and tier one-and-a-half cities, in his estimation). Lo has been bullish on China for years, and never fails to note the potential for vast upside.

But China is a changeable beast, as Lo himself would admit. China’s property market has raised eyebrows in recent years, with rising debt levels and prices matched with a slower economy fuelling fears that a correction – or even a crash – is on the cards. Meanwhile, China’s biggest property players have been muscling their way into Hong Kong’s property market.

Amid this turmoil, Vincent Lo has found his own company, Shui On Land, beset by high debt levels. He has taken on a new strategy to forge a path forward, a path that, in part, banks on the good name he has built for himself since founding Shui On in the 1970s. 

In 2004, Lo was the subject of a profile in The Economist, which dubbed him “the King of Guangxi”. It was a well-earned title. In 1984, Lo famously partnered with the Communist Youth League in China to build a hotel in Shanghai, a bold move at the time. The respect and connections that project earned him would benefit him in the years that followed.

The big stroke of fortune, one that would set Shui On and Vincent Lo apart from other developers in China at the time, was the Xintiandi (“new heaven on earth”) project in Shanghai. The idea was to take an old, traditional neighbourhood with examples of original architecture, and to refurbish the neighbourhood, keeping the original design and styling, while updating facilities and adding in modern retail and F&B outlets.

Lo famously managed to strike up a partnership with the Shanghai city government that allowed the Xintiandi project to go ahead, nearly 20 years ago, and Xintiandi remains a cornerstone brand of Shui On Land. It has been successful enough that Lo says city governments now wish to have their own Xintiandi projects.

“We were working on this big parcel of land in the middle of Shanghai. The first congress of the Communist Party was there, and they wanted to preserve the environment and ambience, according to when they first established themselves,” Lo says of the early discussions. He cautioned the government against building museums and instead created a lifestyle venue that embraced Shanghai’s architectural heritage. “I told them, if it’s a museum, people will come once and they won’t come back,” he says. The exteriors of old stone houses, featuring architecture that Lo says is specific to Shanghai, were carefully preserved, adding to the attraction. The result, years later, is still drawing crowds, eager to sip lattes or wine amid the restored elegance of Shanghai as it looked before the communist era.

Lo eagerly recounts how other Chinese city governments have encouraged him to do Xintiandi projects in their cities as well. A Xintiandi project was completed in Foshan in 2013, a project that took years to complete. It too preserved the traditional look of the houses and buildings there, while opening up spaces for luxury boutiques, hotels and restaurants. “We used old materials, even for rebuilds – that’s why it’s so authentic,” Lo says. Aside from Foshan, there are projects in Wuhan and Chongqing, with two more projects slated for Shanghai. 

New Developments

Yet, however much pleasure Lo may derive from preserving the original architecture of China’s rapidly changing cities, the costs of buying, developing and leasing out such developments are now prohibitive. And while Chinese cities of all stripes and tiers may be interested in preserving something of their original architecture, not all can afford such an option. “It’s only the first and second tier cities where it’s feasible,” Lo says of the Xintiandi concept.

For years, Shui On has been in the process of selling off commercial assets in order to bring down unsustainable debt levels, in one case to his brother, Lo Ka-shui. Lo admits that his previous business model of developing commercial assets for rental resulted in too long a time frame for return on investment, leaving gearing ratios too high.

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