Su-Lin Tan commercial property reporter, Sydney
Sydney developer Yuhu Group is recalibrating its strategy from residential projects to shopping centre development, commercial investments and funds management, the group’s chairman and founder Huang Xiangmo told The Australian Financial Review.
Yuhu’s Huang has been known more for his political donations and views than his business in Australia, but he said his property business would take centre stage this year and has set aside a $250 million budget to spend on projects in 2017.
“It’s a direction we’d like to head, but of course not looking to replace Westfield,” Mr Huang said, when asked if he had aspirations to be a shopping centre giant like Westfield.
“Once you build or acquire a shopping centre, you generate revenue and cash flows over a long period of time. I like commercial because the yield is stable…residential development presents the challenge of having to find the right sites.”
The Yuhu portfolio is already shifting towards the new strategy. Its latest acquisition in October last year was the $81 million office property Pymble Corporate Centre on Sydney’s north shore, which was acquired at a yield of 7.2 percent.
The company also owns a North Sydney office building, the 9723sq m 20 Berry Street and it is developing its flagship shopping centre in Eastwood and The Miller, all in Sydney’s north.
It would concentrate on Sydney with little interest in the other big commercial market, Melbourne, at this stage, Mr Huang said.
“I want to intensify our focus on commercial investments. Our focus is on direct development, and not conversion,” he said.
“I’m also interested in offices. If there’s a good site, we’ll buy and develop, on top of direct investments.
“I’ll continue to do residential developments but it won’t be a standalone focus, it will typically be incidental or part of a mixed-use project like Eastwood. Shopping centre’s a cornerstone with apartments on top with the right opportunity.”
Mr Huang said refurbishing older centres such as Eastwood provided significant “value add”. The group also has Glenwood Village Shopping Centre in Sydney’s northwest.
“Only when you build new centres, you can value add through the addition of things like medical and childcare, gyms, retail, cafes, et cetera. And places like Eastwood town centre, need these kinds of revamped services.”
While Mr Huang has been eyeing assets with a price tag of $30 million to $50 million, it was yields which dominated Yuhu’s decision to buy each time.
“To me, mainly the big scale commercial investments are viable,” he said.
“I’ve always looked at $30 to $50 million assets not less, with a yield of about 6 per cent. I won’t really consider anything below 6 per cent.”
The next move was to roll the assets into funds or trusts, a move Mr Huang had been contemplating for a while.
While Yuhu’s change in direction was not influenced by the slowdown in foreign apartment buyers, Mr Huang said foreign investment was key to Australia’s economy.
“Mr Turnbull has to have the door clearly open for foreign investment, that is the only way to grow the economy,” he said.