CBS Chazen South Africa 4.0

The last two days in Capetown were filled with memorable moments, great people, and we all wish they lasted a bit longer. We toured the V&A Waterfront with members from the Green Building Council, discussed sustainability with Allan Gray Investment Management, visited a local development firm, hiked a 3,600-ft peak, enjoyed wine tastings in Constantia & Steenberg and took plenty of advantage of the coastal night life.

Firstly, our group received a presentation of the V&A waterfront from Colin Devenish, Executive Manager of Operations and a member of the Green Building Council. The Victoria & Alfred (V&A) waterfront is a mixed-use complex located on the Atlantic Shore, in Table Bay Harbor. Designed in the late 19th century, the complex is situated in South Africa’s oldest working harbor and comprises over 300 acres developed for both residential and commercial use. In light of the size and high utilization rate (over 23 million of annual visitors), we were pleased to learn the steps that management has been taking to reduce its footprint since 2008. To-date, the waterfront has invested R45 Million into energy efficiency, water savings and waste recycling across the 300-acre property, as well as introduced a number of other greening initiatives across the area. Efforts such as these have allowed the waterfront to nearly halve its waste going to landfills, significantly reduce electricity and water consumption and increased recycling and lower carbon emissions due to increased use of bicycles and public transportation.

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On the note of sustainability, our group had the pleasure of touring the headquarters of Allan Gray with Michael Smith, Department Head of Infrastructure and Security at the company. Headquartered in Silo One at the V&A Waterfront, Allan Gray’s office was built in 2014 and achieved the first ever six-star green rating in South Africa. We were delighted to hear that the modern building incorporates features such as high-performance, fully-glazed, double skin glass façade to optimize the use of natural lighting and advanced cooling system that rely on cold Atlantic seawater. Furthermore, the heat from the IT server room provides floor heating in the reception area while waste water from hand wash basins and showers is collected, treated within the grey water system, and reused for flushing water. A beautiful anchor to the waterfront, this visionary project has stunning views of Cape Town and of the surrounding harbor.

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Having witnessed the remarkable success of the Allan Gray headquarters development at V&A, our team headed to Devmark Property Group, a development firm in the Western Cape specializing in mixed-use projects across all asset classes. The firm owns all aspects of the development process from land acquisition to entitlement, development, construction and marketing. The firm’s pipeline encompasses investments such as a 1,000-unit integrated housing project, 111 luxury home and 54 assisted living facilities as well as a full-scale R3bn retail development in the Western Cape. Playing off its 30-year old local advantage, Devmark analyzes opportunities in the region with an eye toward demographic trends in urbanization and capital migration.

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Last, but not least, we had a lot of fun in Cape Town. Hiking up Table Mountain at 7 AM after a night of successive pub crawls gave each of us the opportunity to test our limits physically while enjoying the pristine views of the Cape Town skyline. Fittingly, our trip concluded driving along the coast right before the dawn. We stopped the bus to watch the sunset, gathered around, reminisced the memorable times we had had over the past few days and celebrated being in the moment with yet another standing ovation to Africa, a land of stunning natural beauty and fascination for all things (not just Real Estate). Good bye, South Africa and see you soon!DJI_0010.jpg

China is different

Over the last 2 weeks, along with 30 classmates and 2 professors I explored China, visiting Beijing, Shanghai, Hangzhou, Hong Kong and Macao. Our trip was centered around technology so in addition to hiking the Great Wall and eating Chinese delicacies like chicken feet we visited 10 of the biggest Internet companies and Venture Capital investors in China. On average, the Internet companies are only about 10 years old but have an astronomical number of users and huge valuations.

The biggest lesson that I took from our company visits is that business in China is different:

1) Chinese companies do not need to go global-

With a middle class of over 250 million people, more than 300 cities with a population of at least 1 million people, and over 800 million Internet users, China is like nowhere else. The local internet population is still under-served so there is a lot of opportunity to grow and no need for Chinese Internet companies to look outside China! Their focus is on making their products more “sticky” (a term we heard multiple times) and bringing more solutions to their existing Chinese consumers.

2) The big internet companies are so large that they do everything at once-

We observed that as Chinese internet companies grow, their growth does not follow that of internet companies elsewhere and it is difficult to pinpoint what their main business is.  For instance, the food delivery company that we visited called Meituan started off as a coupon website similar to Groupon, but it now also does coupons and restaurant ratings similar to Yelp, food delivery like Grub Hub and it is also a search engine like Google. The stories of Alibaba and Baidu are strikingly similar to this.  Baidu went from a search engine to food delivery. Alibaba has recently gone from e-commerce into the gaming industry.

These companies were able to do this because they typically did not face much competition in their early years and they were able to raise so much capital that when faced with the question of how to expand they looked at different business verticals instead of looking outside China. I also noted that although none of them is profitable and that even though their margins are a fraction of similar US businesses (food delivery margins in China are a tenth of US food delivery companies) they are focused solely on volumes, which I guess is what counts with that population.

China’s market is so big that it stifles its companies looking outside of China.

3) Chinese companies do not have counterparts outside of China-

Contrary to what I had heard before my visit, Alibaba is not the eBay of ChinaJD.com is not the Amazon of China and Didi is not the Uber of China. While the tech may be similar, the details of their operations are completely different to the US and I was impressed to see how much they are innovating and devoting to R&D. They are not just copying from the west.  One company we visited, a subsidiary of Alibaba called Ant Financial has spent close to $250 million developing technology for anti-fraud transactions and is the first company to successfully develop facial recognition and retinal recognition technology that can be used for everyday transactions. They showed us a demonstration and it was effortless!

3.1) This was one example of China becoming a leader in tech advancements especially in Artificial Intelligence. We were informed that close to 50% of all research papers on Artificial Intelligence in 2016 came from Chinese researchers. I am not surprised because in every city that we visited, our tour guide was quick to point out the universities and to mention how many of the top 10 universities in China were in that city. With such a strong talent pool and money at their disposal, Chinese companies are investing heavily in R&D. I left China convinced that Chinese companies will definitely be responsible for a bigger proportion of the technological advancements of the next 10 years.

3.2) China is the real home of BIG DATA.

Before visiting China, I constantly heard of the term ‘Big data’ but until now I did not have a real appreciation for what it is.  The companies that we visited, especially Tencent and JD.com have the real “BIG DATA”.  They are able to collect so much data on their hundreds of millions of unique users from where they eat and shop, how they bank and how they spend on electricity.  To put big data in perspective, Ant Financial the digital finance company that I mentioned earlier, has more than 500 million users, which is almost 10 times the level of the biggest banks in the world. This gives them access to a huge volume of information on default rates, which in turn will allow them to make more informed credit decisions than traditional banks.  Interestingly, my group was curious to know if the government had access to this data but when we asked this question it was intentionally not answered.  Either way, with the size of data available to Chinese Internet companies, it will be fascinating to see if they utilize it to become the leaders in the BIG DATA age.

4) I observed no signs of a slowdown in the Chinese economy.

I had read that the Chinese economy slowed from nearly 8% to 6% growth but I did not see anything like this. That could be because people have become wealthy in such a short space of time. In the last 10 years, GDP per capita has increased from ~$2k to ~$9k. You can see it everywhere with luxury retail brands, the dining out culture, the smartphones and the hundreds of Porsche’s and Audi’s that I have seen people driving. The Chinese middle class is not slowing down and the bottom line of all of the companies that we visited also does not seem to be affected. They continue to invest and are chasing phenomenal growth rates.

5) “There is an entrepreneurial hunger in China like nowhere else.” These were the wise words of the founder of China’s biggest VC, Qining Ventures. He said to us that in the US, there is a lot of innovation but in China there is entrepreneurial hunger, which the Chinese government is fueling by funding and backing early stage startups. It was self-evident everywhere we visited and is a practice that I have read the Nigerian government, is trying to replicate.

Bankole Cardoso ’18

Chazen China Tech/Innovation Study Tour

 

Real Estate Association Study Tour: Final Thoughts

Our final day abroad was spent traveling to Hong Kong, experiencing the process of passing through immigration from mainland China to Hong Kong Island. We learned that due to political limitations, there is a daily cap of residents of mainland China who are able to visit Hong Kong in any given day.

Our planned company visits were complete and we had a full day on Saturday to explore Hong Kong. The island was not as I expected it. Previously, I saw photos of the International Finance Center, a sky scraper housing restaurants, a mall, the logistics and baggage transfer portion of Hong Kong airport and large firms in its tower. I extended this image to the rest of Hong Kong and imagined it as an island covered in large, marble office towers housing retailers of luxury goods.

Instead I explored the narrow, hilly streets lined with everything from local fare to high-end fashion designers and artisans’ boutiques.  We visited the Police Married Quarters (PMQ) which is an adaptive reuse project consisting of two buildings formerly used as police barracks that have been transformed into a unique shopping mall housing local and international artisans and their trendy wares. The phrase “hipster central” would be an appropriate descriptor of this mall.

The city has rich character. Unfortunately, we only visited for one short day and were unable to see even a fraction of the sights available to us. Unlike during the previous days, we used Saturday to explore the city in small groups, deepening our conversations with one another and really coming together as a group.

As I reflect on this past week during my 16-hour plane ride home, the following thoughts come to mind:

  1. I’m grateful for the opportunity to witness China develop as a nation. I’m curious to see if this government-initiated (almost forced) growth and expansion will propel Guangzhou and Shenzhen into sustainable growth or if it will create the next ghost cities due to oversupply of office buildings.
  2. What is the future of public transportation expansion in Singapore and China as this is the one feature critical to upholding future real estate development?
  3. Will China ever place a moratorium on the number of massage parlors present?

 

Nicole Atoyan ‘17

Real Estate in China: Just Build It

Heavy mist and grey skies greeted us as we walked off the plane in Guangzhou, China. The same climate bid us goodbye as we drove to Shenzhen one day later.

The last two days in southern China, first in Guangzhou then in Shenzhen, have been fast-paced as we’ve visited 7 major leaders in the real estate landscape here. The contrast between Singapore and southern China is stark. Singapore is a small city-state with a population of 5.4 million people. Guangzhou, largely recognized as the world’s manufacturing center, boasts a current population of 14 million and is one of China’s 5 National Central Cities. Singapore is pristine. Guangzhou is noticeably a busy, less manicured manufacturing hub and exhibits signs of development. There is a far greater number of cranes in the sky in Guangzhou and Shenzhen than there are in Singapore. Construction is around every corner, largely because land owners must develop newly-purchased land within 2 years of purchase and understand that building income-producing real estate assets is a safe harbor compared to holding cash that may lose value against other international currencies.

We were fortunate enough to visit the the Ping An Financial Center – a 600-meter (1800-foot) Class A office building, which is soon to be completed. This building is the third largest in China and is due to open in April. It will house Ping An, a large regional life insurance company, and several high technology and finance companies. Most importantly, its construction marks the creation of a structural icon in southern China, much like the Empire State Building is in New York City. In fact, the building’s ownership originally requested it look identical to the Empire State Building and subsequently scrapped the idea after viewing the model and deciding that the scale and shape of the structure didn’t quite match the surrounding real estate. The building is 118 floors and boasts an observatory: the first in Guangzhou and undoubtedly a future major attraction and revenue source. We donned hard hats through the construction site, boarded one of 4 double-stacked elevators and travelled to the 56th floor where we experienced the leasing team’s impressive marketing video on floor-to-ceiling screens all around us. We were 1 of 15 tours that day.

On the social front, the LN Garden Hotel in Guangzhou hosted a happy hour for our group, complete with a live band, a dim sum bar, a noodle bar, a full dessert table and a party bus. After a long day of traveling from company to company, this was a welcome surprise! An even better surprise occurred when our resident singer requested Frank Sinatra’s New York, New York and took the stage to serenade us all for the next 5 songs. Dancing en masse ensued. Pictures are of course provided below. Who knew we had so much CBS talent in our group?

Nicole Atoyan ’17

Global Immersion Shanghai – Final Thoughts

Since coming back from the Global Immersion Program in Shanghai, I’ve had some time to reflect on the key takeaways from the trip. A theme that was emphasized in more than one company visit was the challenge that China is facing to adapt its growth model. Due to internal pressure related to labor costs and civil demands, as well as external pressure related to trade and currency frictions, China can no longer present itself as just an automatic low-cost production center. Moving forward, it will be interesting to see how China shifts from a “made in China” approach to a “designed in China / made for China” approach and the movement towards the service industry.

Another theme that was highlighted was just how critical China is for many multinational companies’ global strategy. According to a recent survey conducted by PricewaterhouseCoopers, 33% of CEOs surveyed cited China as a market essential for their respective companies’ growth. This is due to a wide range of factors, ranging from the rapidly growing middle class and increasing mobile phone penetration. As attractive as this market appears, there are still many hurdles to overcome. From the perspective of multinational companies, there are still significant risks to consider when approaching the Chinese market, ranging from rising costs, a lack of market maturity, and fraud. Domestic competition is also a notable threat, since Chinese companies are sometimes given significant advantages, such as free land or lower costs of capital. Overall, it appears that China is heading towards another golden decade, if it can manage to juggle investment and consumption with the various challenges it is grappling with.

I am so thankful that I had the chance to participate in the Global Immersion Program in Shanghai. It was an incredibly educational experience and I appreciated the opportunity to learn more about the challenges and achievements of the Chinese economy. It was also great to explore a new city while getting to know some of my classmates better. A special thank you to Professor Wei and his TA, Angelo Wang, for planning such a fantastic adventure!

Final Reflections on China

It’s been over a week since we arrived in the U.S., exhausted and rumpled from a 15-hour flight from Hong Kong. Anyone else craving dumplings yet?

The trip was well worth the jet lag. Here are some of the highlights now that we’ve all had time to reflect:

1)      The company visits: Our organizers really went above and beyond here. Not only did we get a glimpse of what it’s like to work in what b-school students consider some of the most coveted jobs in the world, we heard the perspective of local developers, too. I actually found our visits with Swire, Hongkong Land and SOHO China the most interesting. It helped that we met with some pretty high level people there.

2)      The food! Just when I thought I had my fill, there was something even more delicious to consume.  Ok, maybe we weren’t all fans of the stinky tofu (it really does stink) or the scorpions on a stick that you could buy in a street market. But I don’t mind the idea of eating dumplings for breakfast.

3)      The sights!! Bonus points to our organizers here. We hit all the major ones on my list, plus stuff that was off my radar. The Great Wall was pretty incredible—and thankfully, we did not visit at the same time as Michelle Obama, which would have surely added to the traffic on the way there. And I for one was impressed with that Giant Buddha, even though it was erected all the way back in 1993.

Finally 4) The group. It was a pleasure getting know everyone’s backgrounds and their future plans. I was impressed by the questions that were asked during our company meetings. The students on this trip truly eat, sleep and breathe real estate.   Image

Overall, I feel lucky to have been a part of this while at Columbia. Big shout out to Karl, Maria, Scott and Bria for making it happen!

-Anjali Athavaley ‘14

 

Built-Up Beijing

It may be just a few hours away by plane, but Beijing feels vastly different from Hong Kong. I can’t read the street signs and just ate pigeon off a stick in a market. Now THIS is China!

Anyone hungry for starfish?
Anyone hungry for starfish?

We’ve been incredibly lucky to enjoy some sunny, clear days here. The unexpected weather has made our site visits even better.

On Thursday, the folks at Swire Properties gave us a tour of their outdoor mall Taikoo Li, located in the Chaoyang district of Beijing. The complex consists of more than a million square feet of retail. The South side has stores that drive foot traffic, like Uniqlo, while the North side is all high-end retailers—think Miu Miu and Emporio Armani.

On the North side, it seemed like retailers had taken huge amounts of space for the amount of foot traffic they were getting. That afternoon, there were few shoppers in sight. Swire said that while shoppers might not be visible on the streets, celebrities who discreetly took elevators stopped by on occasion. In our meeting, Swire added that retailers mainly wanted a presence in Beijing and may start to think more about productivity per square foot in the future.

Our meeting with Soho China was equally fascinating. The developer says its niche is in prime office properties in Beijing and Shanghai. The company’s trendy offices—complete with open spaces and ping pong tables–seemed typical of a startup in Soho, New York.

The design and construction of the office complex we saw, however, was quite different from buildings in the U.S. Check out photos of the Galaxy below.

The building, designed by Zaha Haidid Architects
The building, designed by Zaha Haidid Architects
A close-up shot of the construction at Galaxy.
A close-up shot of the construction at Galaxy.

The trip to the Galaxy was our final company visit. That meant it was time for an acrobat show, the Great Wall and more dumplings.

The Great Wall!!
The Great Wall!!

This will be my final post before heading back to the U.S. I’m so thrilled I was able to experience this country through the lens of real estate. Seems like there is no better time to do it – I’ve lost count of the number of cranes and construction sites I’ve seen here.

See you all back in Uris and have a safe flight, everyone!

Anjali Athavaley ‘14