(Yicai Global) Aug. 29 -- Shui On Land, the Chinese company behind urban redevelopment projects such as Shanghai's landmark restaurant and shopping destination Xintiandi, anticipates a major increase in real estate sales in the second half of this year.

The developer, owner and manager of real estate assets is confident about second-half sales because much interest has been shown in its Shanghai and Wuhan projects, Wang Ying, managing director of Shui On Management Limited, said at the company's first-half earnings press conference yesterday.

Most developers are not optimistic about the rest of the year amid tighter regulation of the real estate market and a more difficult economic environment. Though the overall market has flagged, Wang is not worried.

"It's a structural issue," she said. "Third- and fourth-tier cities are mainly affected. First- and second-tier cities where Shui On properties are located have always been under strict regulation, so the impact of new policies is not that great."

Despite a number of real estate companies saying that they will stop acquiring land in the second half due to harsher restrictions on financing, Shui On will keep seeking market opportunities, said Managing Director, Chief Financial Officer and Investment Director Sun Xihao. If the market slows in the next six months or one year, it may pose more investment opportunities for the firm, Sun said.

First-Half Earnings

Profit rose 8 percent from a year earlier to CNY1.6 billion (USD223 million) in the first half due to commercial product innovations and upgrades, the Shanghai-based firm's latest earnings report said. Rental and related income rose 17 percent to CNY1.1 billion boosted by the reopening of its new Xintiandi Plaza in Shanghai and strong rental growth at many prime properties. Customer count and retail sales at its commercial property division gained 20 percent and 18 percent, respectively.

Property sales rose 76 percent to CNY5.1 billion in the six months ended June, in line with the company's target and market expectations, Wang said yesterday.

Shui On Land, the property arm of Hong Kong-based Shui On Group, is well known for revamping tired city spaces, including Shanghai's Xintiandi. XINTIANDI PLAZA, dedicated entirely to women shoppers, took over the old Pacific Department Store building on Huaihai Road in the city center. Officially opened in May, 97 percent of its retail space has been rented out.

Its Wuhan Xintiandi Horizon North Pavilion began trial operations in May and occupancy has reached 92 percent. The firm's Nanjing INNO Zhujiang Lu, a new generation of office spaces for both private and corporate tenants, began pre-leasing in the second half of last year and there has been a good response. Shui On has brought the INNOconcept to Shanghai as well.

Asset-Light Strategy

Shui On Land has shaken up its business model to pursue an asset-light strategy in recent years. In March, the firm bought back asset management firm Brookfield's equity in its subsidiary China Xintiandi Holding making it once more a wholly owned asset.

Meanwhile, its investment platform Shui On Land Core-Plus Office Venture acquired 5 Corporate Avenue, a prime grade-A office complex located near Xintiandi, in June, boosting the value of the company's assets 24 percent as of June 30 to CNY42 billion from CNY34 billion at the end of last year.

As of June 30, Shui On had nine projects under development in central areas of Shanghai, Wuhan, Chongqing and Foshan with a gross floor area of 8.6 million square meters. This includes 6.7 million sqm of space for rent and sale and 1.9 million sqm for communal facilities such as clubhouses and parking lots, according to the report.