SCALING THE GREAT WALL OF CHINA

16 YEARS IN CHINA

"To the contractor, it's a case of giving one, winning fifty. But to us, even a single dollar of bribe is not acceptable." - Mr Jason Leow, CEO of CapitaLand China Holdings Pte Ltd

I POSITE: zhimen Mall, Beijing,

na - one of CapitaMalls ia's 52 retail properties the country

0 nee upon a time, a Singapore company tried to

make its fortunes in China.

For a few years, it lost money. Few in China knew

the company existed. Yet, it persevered and

laboured against the sceptics.

Sixteen years on, the CapitaLand name is proudly

brandished on more than 100 projects in 40 cities across

China. It is feted with local awards for outstanding

development and management. Its local portfolio, once

in the red, is now worth over S$20 billion, and accounts

for 3 6 % of the Group's total assets as at June 2010.

China has become, in the words of Mr Liew Mun

Leong, President & CEO of CapitaLand Group, "our

most successful overseas market".

BEGINNINGS

In the past, DBS Land and Pidemco Land had seeded

projects in China. However, the projects were

sporadic and there were even some project teams

where the team members did not know one another.

In 2000, CapitaLand, newly formed after the merger

of DBS Land and Pidemco Land, was looking for

a country leader in China to pull together these

disparate projects and forge a common identity. Mun

Leong, eager to recruit the appropriate talent, flew to

Shanghai to interview potential candidates.

Coincidentally, Mr Lim Ming Yan was in Shanghai

at the time as well. After serving as Chief Corporate

and Investment Officer for Somerset Holdings (now

part of The Ascott Limited (Ascott)), he had just been

transferred to DBS Land to help with the merger of

DBS Land and Pidemco Land.

Recalled Ming Yan: "They couldn't find the right

person. Since I went along to check out DBS Land's

China businesses, I was within sight. Mr Liew Mun

Leong saw me and said maybe I should do the job

since I am bil ingual."

Ming Yan, currently the CEO of Ascott, went on

to spend close to 10 years in China after that

fortuitous appointment.

Now widely credited for CapitaLand's success in

China, Ming Yan - who was lauded as Outstanding

Chief Executive (Overseas) at the Singapore Business

Awards in 2006 - recalled how he set about forming

a China team: "First, we had to build the best team.

Once you have that, you will start to do w e l l . "

BUILDING THE DREAM TEAM

Ming Yan took one year to assemble his dream team.

He searched for the best candidates, and bided his

time until they were ready to join him in China.

PIONEERING SHOPPING MALLS IN CHINA

CapitaLand's impact on Chinese lifestyles has been significant

s it introduced the concept of a shopping mall - a one-stop

destination with various tenants and shopper activities. This is

n stark contrast to the traditional departmental store where all

merchandise are placed on shelves with little thought.

conic first was when CapitaLand launched its highly

jeeessful Raffles City concept in China in 2003, with the opening

f Raffles City Shanghai that year. The shopping mall component

of the integrated development soon became, for the youth of

Shanghai, the place to go, be seen, and buy branded items from

international brands.

Other malls were opened in quick succession in the smaller,

suburban second- and third-tier Chinese cities, which cater to the

day-to-day shopping and dining needs of the locals.

CapitaMalls Asia has now 52 malls in operation or under

development across 34 Chinese cities, with a gross floor area of

approximately 46.5 million square feet.

"CCRE is grateful to have CapitaLand's unwavering support in respect of corporate governance and business development since our partnership began in 2006. We are deeply impressed by CapitaLand's discipline in corporate governance, scientific management and outstanding professionalism. We wish CapitaLand further success and look forward to closer collaboration for a brighter future!'' - Mr VV i i P o S u m , C h a i r m a n o f t h e B o a r d o f C e n t r a l C h i n a R e a l E s t a t e L i m i t e d

M r Jason Leow , w h o n o w heads C a p i t a L a n d C h i n a H o l d i n g s Pte Ltd (CCH) as its C E O , was rec ru i t ed f r o m A s c o t t t hen to jo in th is p i o n e e r core t eam.

be it the d e t e r m i n a t i o n o f p lo t rat ios f o r res ident ia l d e v e l o p m e n t s or the r e l o ca t i on process o f res idents f r o m pro jec t sites.

M i n g Y a n even asked his f o r m e r boss f r o m the mi l i ta ry to jo in the t eam. Serv ing as a l ieutenant-c o l o n e l in the S i ngapo re A r m e d Forces (SAF) p rev ious l y , M i n g Y a n used to repor t to M r Lien Beng T h o n g , a f o r m e r c o l o n e l in the SAF.

"I t o l d h im I w o u l d very m u c h l ike h im to jo in me , p rov ided he was c o m f o r t a b l e . He sa id he w o u l d give me his fu l l s u p p o r t , p r o v i d e d I was c o m f o r t a b l e ! " reca l l ed M i n g Y a n f o n d l y o f the o c c a s i o n w h e n he m a n a g e d to s q u e e z e in his r e c ru i tmen t p i t ch to M r Lien at the a i rpor t be fo re f l y i ng off.

The t e a m c o m p l e t e , M i n g Yan was all ready to take on the a r d u o u s tasks f a c i n g h im in C h i n a .

" The marke t was not very r egu l a t ed . A lot of th ings d e p e n d e d on guanxi (relationship)," sa id Jason. He reca l led a case in w h i c h C a p i t a L a n d had leased out a parce l o f l and o r ig ina l l y i n t e n d e d fo r a later phase of a la rger c o n d o m i n i u m project . The lessee, in t u r n , d e c i d e d to set up a t e m p o r a r y m a r k e t p l a c e on the leased land.

" W h e n w e d e c i d e d to take back the p iece o f land f o r r e d e v e l o p m e n t , w e c o u l d no t remove h im because his shops w e r e all d o i n g so we l l . In the end w e had to c o m p e n s a t e h i m . " He a c k n o w l e d g e d : " W e lost m o n e y in the in i t ia l f e w years , su f f e r ed a l i t t le bit. That can be sa id to be o u r t u i t i o n f e e s . "

OPPOSITE: Orchid Garden, Beijing, China

Then dea th struck.

M r Lien passed away in 2 0 0 2 . The Gene ra l M a n a g e r (GM) o f C C H had been j o g g i n g in a park in S i n g a p o r e w h i l e on h o m e leave, w h e n he was f e l l ed by a s u s p e c t e d heart at tack. "I was very sad ; it was a pe rsona l b l o w to m e , " sa id M i n g Y a n , v is ib ly a f f e c t ed .

But the t eam f o r g e d on.

SCALING THE CHINA WALL

Sca l ing the C h i n a wa l l was no easy task.

-aced w i t h the sheer scale of a d i f f i cu l t marke t £"d cu l tu ra l hu rd l es , many f o r e i g n deve lope r s had * : j n d e s t ab l i sh ing a f i rm f o o t i n g in the c o u n t r y a ~ ; - u m e n t a l cha l l enge . There w e r e many grey areas ,

QUALITY HOMES IN CHINA

Over the past 16 years, Cap i t a Land has d e v e l o p e d , o r unde r t aken to d e v e l o p , a tota l of 2 8 , 0 0 0 h o m e s w i t h a gross f l o o r area of 4 .8 square met res in China.

M r Chan B o o n Seng , Reg iona l Gene ra l M a n a g e r , East Ch ina of C a p i t a L a n d China Ho ld ings Pte Ltd, summar ises res ident ia l des ign p re f e rences across var ious c i t ies in China.

" A t the m o m e n t , Shangha i is into m o d e r n c lean minimal is t des ign . Beijing is even more m o d e r n , " said B o o n Seng , w h o has been o v e r s e e i n g the pro ject m a n a g e m e n t of C a p i t a L a n d res ident ia l and c o m m e r c i a l p ro jec t s in Ch ina s ince 1994.

" Buye r s in H a n g z h o u and N i n g b o , h o w e v e r , pre fer c lass ica l des igns w i t h heavy s tone , s t r o n g c o l o u r s , and R o m a n c o l u m n s . "

G iven the w e l l - k n o w n d i f f i cu l t i e s in c o n d u c t i n g bus iness in C h i n a , it is l i t t le w o n d e r tha t most investors w e r e hes i t an t to p lace s i gn i f i c an t bets in the c o u n t r y in the early years. O n e examp l e was the Raf f les C i t y Shangha i pro jec t , w h i c h was near ly s c r a p p e d as a result o f the A s i a n f i nanc i a l crisis. " T h e investors w e r e wary o f p u t t i n g more m o n e y into C h i n a , and in to the project . W h e n w e put up the r e c o m m e n d a t i o n to restart the pro ject in 2 0 0 0 , it t ook us one year to get all the sha reho lde r s o n b o a r d , " M i n g Y a n shared .

But in the e n d , the hard w o r k put in by C a p i t a L a n d ' s C h i n a t e am and the i r i nc reas ing w e a l t h of on-the-g r o u n d e x p e r i e n c e , pa id off.

From r u n n i n g ma in l y r es iden t i a l pro jec ts in Shangha i in 2 0 0 0 , C a p i t a L a n d is n o w r e c o g n i s e d as a leader not on ly in b u i l d i n g h o m e s , but a lso in r u n n i n g success fu l mal ls , d e v e l o p i n g mega- in t eg ra t ed Raff les C i ty d e v e l o p m e n t s and o p e r a t i n g serv i ced apa r tmen t s across the w h o l e of C h i n a .

STAYING AHEAD

The c h a l l e n g e n o w is to stay a h e a d of the game.

As w i t h its O l ymp i c s s p o r t i n g successes , C h i n a is a lso f a m o u s l y c o m p e t i t i v e in t he bus iness w o r l d .

M u n Leong o n c e c o m m e n t e d : " The re is n o t h i n g tha t we can do tha t they (the Ch inese ) can ' t . W e just have to ma t ch t h e m s t r eng th fo r s t r e n g t h . "

H o w e v e r , C a p i t a L a n d has bui l t up s o m e un ique capab i l i t i e s over the years too . " C a p i t a L a n d is a mul t i-sec tor c o m p a n y , un l i ke many real estate c o m p a n i e s in C h i n a . In re ta i l , f o r ins tance , w e do not just bu i l d but w e a lso do leas ing and p rope r t y m a n a g e m e n t , " n o t e d Jason.

He c i t ed the i con i c Raff les C i t y d e v e l o p m e n t s -all c o m b i n a t i o n s o f r e s iden t i a l , re ta i l , se rv i ced a p a r t m e n t s and o f f i c e space. " T o d a y , C a p i t a L a n d is k n o w n fo r all the Raff les C i t y pro jec ts tha t have been bui l t . A n i n t eg ra t ed d e v e l o p m e n t is very d i f f i cu l t to do because it puts all these d i f f e r en t bus iness units t o g e t h e r in to one i n t eg ra t ed d e v e l o p m e n t . This is d i f f i cu l t f o r most loca l d e v e l o p e r s . "

In 2 0 1 0 , a g o l d e n o p p o r t u n i t y f o r C a p i t a L a n d to d o u b l e its p rope r t y p o r t f o l i o in C h i n a c ame a l o n g , and the c o m p a n y sna t ched it. C a p i t a L a n d a cqu i r ed Or i en t Overseas D e v e l o p m e n t s Ltd (OODL) in a l andmark US$2 .2 b i l l i on ( app rox ima te l y S$3.1 b i l l ion) dea l tha t b o o s t e d C a p i t a L a n d ' s p rope r t y p o r t f o l i o in C h i n a to 2.8 m i l l i on square met res immed ia te l y .

A / £ P Hit FHF "ft THIS PAGE: Representatives of CapitaLan Muchuan Green Hope School Sichuan, presenting a gift to Ms Ho Ching, Executive Director & CEO of Temasek Holdings, during CapitaLand'; "15 Years in China" Celebrations in Shanghai

OPPOSITE: Ascott Huai Hai Road Shanghai, China

Land is the largest international serviced residence owner-

or in China. Its serviced residence business unit, The Ascott

:ott), first entered the China market more than 10 years ago.

now has over 6,000 apartment units in 33 properties across 15

ncluding Beijing, Shanghai, Guangzhou, Shenzhen and Chengdu.

"Ming Yan and I have walked out on many deals

because we are not prepared to accept bribes," said

Jason. "The message we send out is, we will strike

you off our list of qualified suppliers if you offer

money to our staff. And if our staff ask you for a

favour, you tell us and we will get rid of the staff."

"The Shanghai government was very happy when

we took over OODL because they saw what we

did before, with Raffles City and other residential

projects. We don't hoard land. We buy the land,

develop and add value to it," said Jason.

He cited a recent case in Chengdu, when a

contractor offered a G M US$1 mill ion to award a

US$50 mill ion CapitaLand contract to his company.

"To the contractor, it's a case of giving one,

winning fifty. But to us, even a single dollar of

bribe is not acceptable. We barred this contractor

from all our jobs."

UPHOLDING INTEGRITY

CapitaLand has also built up its China reputation on

unswerving integrity.

The message is drilled down to more than 5,000 staff

in China, who form the backbone of CapitaLand's

operations there. About 9 5 % of the employees are

local Chinese. When they first joined CapitaLand,

they were "amaze d" by the rigorous systems in place, Jason said. "It is a surprise to them because generally, real estate companies in China are very dependent on bosses and individuals, and not systems. We are different from the locals because while we are very close as individuals, we behave like an institution. We do not want to depend on individuals."

Jason added: "The CapitaLand culture is very strong in China and that is a key reason for our success. We co more than we talk. We fly the CapitaLand flag before us."

BREAKING PEOPLE BARRIERS

At the heart of rules and systems, however, are the collective efforts of the people in the organisation.

And CapitaLand prides itself on how its people are spotted, nurtured, and challenged.

Ming Yan pinpointed, with startling clarity, two breakthrough moments which fundamentally changed the way CapitaLand manages its staff in China.

In 2005, he was in Henan province to visit the project sites of a potential joint venture partner. When he

stepped off the mini-bus, he was taken aback - not because of the land or the buildings, but because of the people who were put in charge of the sites.

"The GMs of the projects were all very young locals, in their late 20s , " explained Ming Yan. On the contrary, most of CapitaLand's GMs at the time were expatriates from Singapore, while locals in their 20s only played supporting roles.

^ ^ ^ m "The whole trip, instead of looking at

the buildings, I was more interested in the people! I asked the young GMs questions and I realised that while they were not very experienced, they were committed. And they had the technical knowledge."

"It was a mental breakthrough."

Ming Yan decided to put aside his fear that the inexperienced might make mistakes, and set about promoting younger competent staff, who up till then were deputies, to decision-making posts. "They rose to the occasion. In fact, they have done well and I'm very happy," he said.

The second breakthrough came also in 2005. Ming Yan noticed that one of CapitaLand's partners in China was hiring more than 50 fresh university graduates a year from Chinese universities.

Curious, he asked the partner if he had positions for all of them and the reply was: "It does not matter if there are positions. We reel in the talent and then find places for them."

Ming Yan agreed: "It struck me that we had not been progressive enough in our human resource (HR) practices. We should take in as many as we can train,

THIS PAGE: CapitaLand staff in China having a brainstorming sessk

OPPOSITE: A CapitaLand staff participating in a team building exercise

50

not d e p e n d i n g on h o w many pos i t i ons w e have. If they are g o o d , they w i l l be ab le to de f i ne the j o b . " He s u b s e q u e n t l y f o u n d out tha t in that same year, C a p i t a L a n d d id not hire a s ing le un ivers i t y g r a d u a t e in C h i n a as the d e p a r t m e n t s w e r e not sure they had pos i t i ons to f i l l .

S t r a i gh t away , he s q u a r e d his s h o u l d e r s and h e a d e d to t o p C h i n e s e un ivers i t i es , such as Fudan Un ivers i ty and S h a n g h a i J iao Tong Un ivers i ty , and made a pe rsona l p i t ch to the s tuden t s to jo in C a p i t a L a n d .

Said M i n g Y a n : " O n e of the s tudents said the " :-the C E O persona l ly came d o w n to the campus to & « s tudents s h o w e d the company ' s emphas is on p e : : =

W h a t also go t the s tuden ts exc i t ed was M i n g Y a n ' s e x p l a n a t i o n that C a p i t a L a n d was an internat ional c o m p a n y w i t h a g l o b a l p r e sence , w i t h p len ty of r o o m to g row . Some of these b r igh t y o u n g s tuden ts b e c a m e m a n a g e m e n t assoc ia tes , we re ass igned men to r s and ro t a t ed t h r o u g h d i f f e r en t d e p a r t m e n t s fo r up to six m o n t h s at a t ime.

From ze ro app l i c a t i ons in 2 0 0 5 , the c o m p a n y rece ived a s t u n n i n g 4 , 1 9 9 app l i c a t i ons f r o m univers i ty g r adua tes in 2 0 0 6 . Ou t o f these , C a p i t a L a n d h i red 11.

The f o l l o w i n g year, the n u m b e r of app l i c a t i ons swe l l ed f u r t h e r to 1 6 , 9 3 5 . C a p i t a L a n d h i red 30 .

The s c h e m e w o r k e d marve l lous ly . " A f t e r six m o n t h s , the d e p a r t m e n t s w e r e not w i l l i n g to re lease the p e o p l e ! " e x c l a i m e d M i n g Yan . " T h e y w e r e so smar t and d o i n g such a g o o d job they have b e c o m e ind i spensab l e . It s h o w s tha t these p e o p l e can pick th ings up very f a s t . "

BUILDING PEOPLE

M r Q ian Y i q i is a s ta f f m e m b e r w h o has learnt a lot in his seven years of w o r k i n g in C a p i t a L a n d .

The Ch inese na t i ona l , w h o had w o r k e d fo r t w o S ingapore c o m p a n i e s prev ious ly , d e c i d e d to jo in C a p i t a L a n d in 2 0 0 3 because of its c redo.

"I was d r a w n by the c r edo of ' B u i l d i n g P e o p l e ' , " sa id Y iq i . " The emphas i s on mer i t o c r a cy was s o m e t h i n g I was a t t r ac ted t o , and I t h o u g h t I w o u l d be ab le to f i t in to this sort of c o r p o r a t e c u l t u r e . "

In his seven years w i t h the c o m p a n y , the spec i a l i s t in e c o n o m i c g e o g r a p h y has g o n e f r o m a j u n i o r s ta f f d o i n g l and a c q u i s i t i o n in the eas te rn par t o f C h i n a , to b e c o m e D e p u t y R e g i o n a l G M of East C h i n a . Today , he oversees h u n d r e d s of

staff and major projects - including the construction

of Raffles City Hangzhou and Raffles City Ningbo.

He counts his Ningbo experience as one that

sharpened his leadership edge. In 2005, he was sent

to the city with three other staff to get things going.

It was the first time CapitaLand had ventured into a

second-tier city.

"It was very challenging because we had to start

everything from scratch," said Yiqi. "Local policies

were different; we did not know any of the officials."

But as he put it, "I did it with pain, but there was

also gain." By the time he was transferred to another

regional office, a CapitaLand office of over 70 staff

had been established in the city and several major

projects were underway.

Said Yiqi: "I have been growing with the company

over the years. The 'Building People' credo, which

was why I first joined the company, was something

which really happened to me. I was challenged and

nurtured, and I am thankful for that."

THIS PAGE:

Summit Residences, Ningbo, China

OPPOSITE: Westwood Green, Shanghai, China

ROBUST FINANCIAL SERVICES

Financial services are an integral part of the Group's drive to

expand its business and grow its franchise value.

CapitaLand originated and manages a portfolio of China-focused

funds covering the mixed-use development, residential, retail,

business park, and serviced residence sectors. The first China-

focused fund, CapitaLand China Residential Fund, was ciosed

in 2004. This fund successfully exited in September 2009 and

outperformed target returns. Thus far, the company has originated

nine China-focused private equity funds. CapitaLand also launched

and managed CapitaRetail China Trust, the first China shopping mall

real estate investment trust listed in Singapore.

Said Mr Jason Leow, CEO of CapitaLand China Holdings Pte

Ltd: "We are very strong in fund and capital management. In

China, a lot of people are still relying on banking facilities but

we started real estate funds many years ago. This is something

that has helped us right through a difficult banking environment,

whenever there is credit t ightening."