Member Dialogue: Hei Ming Cheng, Chair of ULI China Mainland

Member Dialogue: Hei Ming Cheng, Chair of ULI China Mainland

March 16, 2020

Q In recent ULI Emerging Trends in Real Estate reports, survey participants speculated how “Black Swan” events will put a stop to the decade-long boom of the global real estate sector. Can the ongoing coronavirus contagion develop into such a Black Swan?

Hei Ming Cheng: This is definitely a Black Swan event for Global real estate market with more serious impact on Mainland China. Hong Kong and Macau will also be affected due to their close dependence and integration with Mainland China. Tourism related sectors such as hotel, F&B and high end retail will be the most affected ones. Office sector will also be affected but relatively to a lesser extend as demand will slow down. Depending on Government supporting measures, some of these impacts may be short term and will rebound after the epidemic is over. However, some impacts will be more long lasting as behaviors may change due to this virus outbreak. For example, most people will get used to online education, online meeting as well as online shopping for things ranging from groceries to even properties (VR viewing etc).

Q How are LP investors looking at the current situation? 

Hei Ming Cheng: No LP would like what is happening now. Smart and sophisticated LPs will monitor and evaluate:

  • How GPs will manage and introduce measures to mitigate and contain the damages during and after the epidemic
  • Whether there are trend setting behaviors that will impact their current and future investment as well as their selection of GPs
Q As GP investor, what are your key concerns with respect to the impact on your portfolio, and how do you address the areas of concern? 

Hei Ming Cheng: Our key concerns and respective measures are:

  • Safety of our front line team and the employees of our tenants. In all our buildings, we have introduced temperature checking, travel history reporting system as well as frequent regular cleaning of common areas. All our employees with travel history from other cities have to stay at home for over 14 days before coming to office.
  • Impact on the cash flow of our projects as there will likely be some rental concession for tenants serious affected by the epidemics, rental default, slowdown in demand. We just have to be more patience and hold on to the asset longer and hope occupancy and rental will recover over time and value will go back.
  • Value of assets will probably come down due to overall slowdown in economy as well as supply and demand dynamic changes. Same as above, we just have to be more patience about our investment.
Q How do you see ULI continue to benefit its members and contribute to the real estate industry during this challenging period? 

Hei Ming Cheng: ULI is a very good community with members from all real estate related disciplines. With the help of ULI, Members can share honest information, experience and learn from each other on ways of dealing with situation like this. Also, there will be long lasting trends that will impact building specification, people’s working, living and spending behavior. ULI can organize forums so that members can discuss and exchange ideas on these.

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