Chairman says there should be incentives for Irish firms entering the Chinese market

TREASURY HOLDINGS believes strong growth in its Chinese business over the next few years will transform the whole company, as breathtaking expansion in the world’s most populous nation offsets a gloomier outlook for the European market.

Treasury’s new office space in Beijing’s Central Business District is so fresh that the trendy bare concrete walls left smudges on company chairman Richard Barrett’s suit, but he was more focused on the attendance by numerous local dignitaries, all key to helping with project development.

"If you landed from Mars and asked where should you put up a real estate operation, you'd set up here," Mr Barrett said in an interview with The Irish Times.

“If the home market is in crisis, and Europe isn’t great, then more companies should come here. Our target was that China would make up one third of group assets, and it will make that,” he said.

“In China the projects are so large, and the capital needs are large. The company is getting quite big here, and China could easily reach 50 per cent of assets as the value in Europe declines and the value of China assets rise,” said Mr Barrett. “Beijing is highly competitive, but it’s the capital,” he said.

Treasury is also looking at second-tier cities such as Chengdu, Tianjin, Ningbo and others, but as he points out, these secondary cities generally have bigger populations than Ireland.

The group has formed a strategic partnership with the Trio Group to expand into China’s eastern coastal province of Shandong, giving it access to Qingdao and other gateway cities in a region that is simmering.

Earlier this year, the Treasury-backed China Real Estate Opportunities (CREO) sold a stake in a development in Qingdao Bay, Qingdao, to its partner in the property, SIIC, Shanghai Holdings, realising £33.8 million (€39 million) in the process.

Trio has been operating in Qingdao and the broader Shandong Province with great success for over 15 years and has developed high quality real estate projects totalling in excess of three million square metres, representing more than 20 projects.

During the summer, Treasury China Trust (TCT), which is 40 per cent owned by Treasury Holdings, announced it has secured a €369.6 million refinancing deal of its flagship property, “City Center” in Shanghai.

China is a beacon of light in the Treasury firmament. Real Estate Opportunities (REO), the listed property investor backed by Treasury Holdings, is relying on the support of the National Asset Management Agency (Nama) and a number of other creditors to stay solvent.

REO owns London’s landmark Battersea Power Station and a number of high-profile Dublin office blocks, and Mr Barrett said he was hopeful that a decision on November 11th on the Battersea project will go his company’s way.

Treasury has been in China for seven years and the unit is fast becoming one of the key assets in a portfolio that is suffering from scrutiny by government regulators at home.

Treasury’s focus in China is on the retail commercial sector, which is where they have been most successful.

One of the retail brands that Treasury is working with is LVMH, which has scores of major brands and is keen that any retail outlet gives a good showing to as many of these brands as they wish.

“We are interacting with them. Hong Kong developers can do this, but the demand is so huge,” said Mr Barrett.

Beijing remains a challenge. One of Treasury’s earlier forays into the China market was a shopping centre in the red-hot retail sector of Fudan, but at the last minute the Chinese investors pulled out, leaving Treasury in a difficult position.

Treasury appears to have learned from this bitter lesson, and is focusing on building the best contacts possible in the business.

One of the phrases most often uttered in the launch of the CBD headquarters is “contacts”. They are essential to thriving in China.

Among the key hires are the group’s chief investment officer Wendy Yao, who was formerly head of Citibank’s property arm and who brought many contacts into the mix.

“If we have the right partners, it’s easier to proceed faster.”

Everyone fears the bubbles in the Chinese property market, but these are not really an issue for Treasury in China, because such issues are predominantly focused on the residential market.

Mr Barrett believes commercial property development is very much in tune with the rise in the economy. This is growing at 8 per cent a year, so there is plenty of scope for commercial retail expansion.

“The government sees you need expansion of the commercial real estate market to deal with 8 per cent economic growth,” he said.

Treasury is also hoping to take advantage of reform of the pension system in China, which is moving towards the European system of pay-as-you-go, which should free up a lot of fund money for developing properties.

He believes that China is a market that everyone should be looking at these days and is a big fan of some kind of government incentivisation for coming out to this booming region.

“More companies should come here now. There are 400 here according to Enterprise Ireland, but it would be a good investment to assist companies who want to set up here. There is no point in flying out for two weeks, you need to be here. You need to take more time, have more people, money and stamina. And Chinese people are like Irish people – they like singing, drinking and laughing,” he said.