Among China`s innumerable real estate developers Pan Shiyi is second to none in two things: anti-mainstream ideas and controversy creation.
When in early 1998 he became the first developer to introduce SOHO (small office, home office) to China, he soon found himself inundated in a flood of ridicule, doubt and opposition. One fellow developer took the time to write a 10,000-word letter challenging the feasibility and practicality of his idea. Another went so far as to blend tea and beer in one cup to characterize SOHO`s design and smash the cup in front of Pan.
Purchasers of Pan`s newly completed houses were notified that if they didn`t like their homes they were welcome to return them for a full refund plus ten percent annual interest; an unprecedented practice in Beijing where wrangles between home buyers and developers are a common scene. Fellow developers once again blasted Pan for violating trade rules and making their lives difficult.
The market tells another story. When SOHO went on sale in January 2000, high prices (over 9,000 yuan per square meter) and freezing winds did not deter people from lining up in the middle of the night. The sales target for the whole year was reached in three days. It was not until August 2001 that Pan decided to build villas in Hainan; but even before ground was broken the first 40 villas, worth 73.59 million yuan, were hotly contested. They all found owners in early October.
Fourteen years of struggle has made this village boy into a charismatic business guru. Pan`s road begins with a rugged mountain path he would tread every day to buy medicine for his bed-ridden mother; on which he once walked 10 kilometers to send his younger sister to a farmer because his parents were too poor to raise her. Today, determination is still in his eyes, along with enthusiasm and humor.
Q: Why do you love real estate development?
A: Real estate development is mainly dealing with the land. I think so long
as you are dealing with the land, whether you grow crops as a farmer or build
houses as a developer, your heart will feel at ease.I parted with my old partners
because they wanted to do something in finance, aviation and movie production.
I don`t have feelings for these sectors. I don`t know how a plane flying in
the sky makes money. For me, they are all difficult. So I left Vantone. My feeling
rests on the land, in building houses. I really love to build houses.
Q: How do you choose your projects?
A: It`s simple. Only three questions to ask. First, will the product be of high
quality? Second, will it be convenient and comfortable for the customers? Third,
will it keep up with future development trends? If you have a basic understanding
of demand, then you check with the city`s plans. Then you have a look at the
market and see what resources you can use.
Q:
You often talk about building good houses, but your buildings, like Vantone
New World and New Town, have never been free from complaints or even lawsuits?
Do you feel you`ve lost face?
A: I don`t. If in society no customers complain, the legal system must be incomplete.
People should be encouraged to air their views and dissatisfactions.
As for those directed toward our buildings, I have one comparison to make. Are
complaints levied against five-star hotels? Five-star hotels encounter more
complaints than ordinary hostels. Can we conclude that services in five-star
hotels are bad?
Q: You collected all the customer complaints and are selling them as
a book. You even divulged to a TV program that you stole a bike in Shenzhen
when you were young. Why this tendency to expose your own scandals?
A: In this age where information is highly developed it would be stupid to cover
up facts from the public. I think Clinton and Lewinsky tell me how society has
really changed. The media should be allowed to speak.
One has to face himself and his past to become strong. When I arrived in Shenzhenit
was hot and I didn`t understand the dialect. Others were driving sedans to work,
but we had only legs. We stole a bike. So what? The police didn`t catch us.
This is part of my life that I want to face.
Q: Are you tired of the hurricane of controversies?
A: No. I really don`t care. They can say whatever they want. In today`s world
the most important thing is to exchange ideas. Whether it`s done in a polite
or a violent way, I embrace it. I could come out and quarrel and quickly put
an end to controversies, but I won`t do it. I don`t want to be narrow-minded.
Q: You allow purchasers to return their houses without giving any reason,
and you reimburse them including interest. Why?
A: When the purchasers bought these houses one and a half years ago, they could
refer to designs on paper and in showrooms. Now the houses are ready, but some
customers may feel unsatisfied with what has been built. From on-paper houses
to real homes, nearly every project in Beijing has involved clashes between
developers and customers. I want to turn those clashes into exits for customers
who want out. Considering that after one and a half years the value of the houses
has risen by around 35 percent it would be unfair to only give back what the
purchasers originally paid.
Q: Will this practice be widely adopted in the realty sector?
A: Yes. Unlike its American counterpart, China`s financial environment cannot
support large loan amounts, bonds or realty investment funds to developers.
We depend on customers` installment payments to shore up the industry. On-paper
houses are always different from completed ones and customers, after taking
risks to invest in your project, should be allowed to choose to keep or return
their houses before they move in. The government should put forth regulations
to guarantee such consumer rights. Other developers say the Ministry of Construction
will never accept my advice. Let`s wait and see.
Q: I hear one purchaser is likely to return his house because he doesn`t
like the red color. He thinks it`s the color of communism. Is that an acceptable
reason?
A: Yes. Divorce is about individual feelings. Sometimes it`s hard to come up
with an exact reason. This is a Finnish customer who told me about the problem
of color. He thinks red means communism. I expect three to four customers will
return their houses.
Q:
Other developers condemn your reimbursement plan as a violation of trade rules
and they claim it has made their lives more difficult. Do you feel the hatred?
Do you feel guilty?
A: I do feel some hatred. But I don`t care. They are my competitors. The better
I do, the more they complain about me. When I do a bad job, they may pity me,
but by then I`ll be doomed. Whether I`m willing to allow the customers to return
houses and how much I want to reimburse them, that`s business between me and
the customers.
What are the trade rules? Who draws the rules? Where are they?
Why can`t I see them on paper? So long as I don`t violate government policies
and regulations, and so long as I pay taxes according to the law, I`m a good
entrepreneur.
Q: Redstone just completed one project called New Town. The other three projects, either still on paper or just broken ground, have been extremely well received. How can customers trust your company so much based on one completed project?
A: In the realty sector the core competitiveness of a company is neither talent, nor capital, nor engineering. Anything that can be bought with money is not core competitiveness. Core competitiveness is innovation, which you cannot buy.New Town proves our innovative power. We spent over three years on this project to build something different.
We are the first to paint big red, big blue big colors onto the outsides of buildings. We killed balconies, in whose place we put floor to ceiling windows. It`s contentious. SOHO tries to integrate home and office based on the Internet. It`s a space innovation. Other developers thought SOHO should be blown up.
But customers love it. Our houses sell much better at a higher price. Our profit runs up to 20 percent of the sales volume. It`s all because of innovation. The customers believe in me. When I did the second phase of New Town, they came without advertisement. One even purchased 17 apartments.
These customers, 300 to 400 of them, follow me.
Q: You have been the topic of many controversies because you are innovative
in building ideas and sales techniques. How much has your company invested to
be different from others?
A: It`s hard to quantify. First of all, innovation demands courage because it
involves risk. As a decision-maker I`m willing and confident to take risks.
My
wife (a Redstone board member) and I think about research and development all
day long. We travel the world a lot and are anxious to introduce good things
to China. Our Hainan villa project is actually the fruit of our month-long stay
in France`s Cote d`Azure. Developers should be forward-looking. China is now
at the same stage as France was in the 1960s, when the economy and rising incomes
enabled people to vacation in warmer places. These people are expanding very
fast in China.
The biggest pitfall for China`s developers is they basically have no funds for
R&D. They are more willing to do ads, which usually account for 3 to 5 percent
of their total incomes. I spend only 0.7 percent on ads, and I keep an R&D
team of nine people. I spare no money on design. To build our Architects` Gallery
in suburban Beijing, I invited 10 of the best architects in Asia to each design
a villa. For only one villa each architect and his assistants will have to fly
to Beijing 20 times. Think about the airfare alone. One design for one house
is obviously different from one for 1,000 houses.
Q:
In your career, who helped you the most?
A: When I gave up my job in the Ministry of Petroleum to do business, nearly
everyone encouraged me to turn back. Only one friend who once did projects in
Iraq told me to keep going ahead. Even if you become a beggar, don`t turn back
he said. He was my only supporter.
The person I am most grateful to is Deng Xiaoping. Without him, my father, who
was wronged in the Cultural Revolution, would not have been rehabilitated and
I may never have left Gansu. We might still be toiling in the village. Without
[Xiaoping`s] speech during his tour of southern China, Hainan would never have
developed and we would not have what we have today.
Q: As a poor boy from a rural area you seem to preserve the simplicity
and persistence unique to the country. But the trade you are in provides products
that best represent urban civilization. How do you resolve that conflict?
A: If we consider the conflict more deeply sometimes we`ll find that the conflict
is not that absolute. Take the functions of homes. We may think village houses
are backward and unsuitable to live in. In an agricultural civilization a house
is for living, storing, animal raising and even crop growing. In industrial
civilizations social labor division is very clear and so is the function of
houses. People are required to do certain things at certain times under certain
circumstances. But now we are in the information age and the industrial way
is obviously problem-ridden. If we return to the multifunction nature of primitive
houses we may find practical lessons. SOHO is a multifunction concept.
As for my own basic nature, it`s hard to change. I`m like a semi-finished product.
After processing, its most basic part won`t be changed.
Q: What`s your goal for Redstone? Is it to be the largest developer
in China?
A: In China many companies like to fight for the title of number one in their
respective industries. I don`t like this. It belongs to the industrial age.
The information age emphasizes individuality. We want to be at the vanguard
of China`s developments; we want to set and lead the trend, both in product
and sales techniques.
Q: As for yourself, what position do you want in China`s realty industry?
A: I want to lead, but it`s still premature to talk about this. One or two years
later, when my Architects` Gallery and Hainan villas move from design paper
to reality, people will see for themselves my leading position.
Q: You are said to be philosophical in building houses. What thoughts
do you try to portray through your buildings?
A: People without thought or worldview will never build good homes. I think
about simplicity, communication and being at the cutting edge. Five or 10 years
later, people will realize our contributions - like paintings, large gardens
for every four residential floors to share and SOHO for work and living. These
are my most important contributions to China`s realty sector.
Q: All your houses are expensive. Do you feel a responsibility to do
something for ordinary people?
A: Market is circulation. I build houses for the rich to live in so people in
the second tier can move into houses left by the wealthy, and the benefits trickle
down to ordinary people. Every class of people should have someone to serve
them. If all businessmen serve all people, it would be a big mistake. Businessmen
serve clients. The government serves ordinary people. If I`m a businessman producing
a product for women, men should not complain that I do not serve them.
Q: A lot of developers are storing land resources for future use. What
have you done in this regard?
A: I have a different idea, to build better houses on the land. I don`t want
to store pieces of land, let them bask in sunlight and later net a profit just
because the value of the land rises due to scarcity. If I think a project is
good, I will purchase the land according to the market price. The reason I can
make money is that I`m capable of building good houses. I don`t want to be a
land bank. I don`t think it`s the job of developers to wait for the land to
gain value and make a profit. Though Wang Shi (president of Vanke) has stockpiled
land, I have built good buildings on the land.
