An exclusive retreat

If the promotional literature is anything to go by, the Shanghai Links J executive community will be a most impressive project. No expense has been spared in constructing or promoting this development and, after much talking, the project is starting to take shape.

Shanghai Links offers residential luxury, far away from the frantic pace of life in Shanghai. The concept is to provide a comfortable environment for the expatriate manager and his family and so ensure management continuity. "It will help persuade top corporate executives to accept assignments in this region and will, in turn, make the region more attractive to multinational corporations," says Mr Barry Hansen, President of Sealand Housing Corporation, the Hong Kong-based real estate company behind this project.

More than just an upmarket housingcomplex, Shanghai Links will also include an American School and various recreational facilities including a marina and 18-hole championship golf course designed by Jack Nicklaus. Future building plans include a hotel and hospital clinic.

Cleaner air

Located to the east of Shanghai on the East China Sea coast, the development is likely to be the most prestigious address for expatriates working in Shanghai. Leading names already signed up to the project include Kodak, General Motors, BASF and Citibank.

SC Johnson is taking six units for its executive committee, comprising both Americans and Asians. Mr Al Hornish, the company's human resources director in Shanghai, says the site appeals to golfers, walkers and cyclists, while the open spaces are a boon for families with pets.

It will also be convenient for those with young children, both because of the school and the reduced pollution. "The big ad-vantage is that the air is much better out there," says Mr Neil Marchuk, human resources director of Dupont China. Marchuk is taking one unit and Dupont will possibly take more in future. With two daughters aged eight and 11 and a wife who teaches at the American School, Marchuk and his family are looking for-ward to the move.

In total, 800 executive homes are being built on a 135-acre site, comprising around 500 detached homes and 300 condominium apartments. Being built to North American design, the first houses should be available by the end of this year. All the raw materials except concrete are being imported. Likewise, all the skilled labour has been brought in from abroad.

Standard appliances for residents include dishwasher, fridge/freezer and full-size washer and dryer. Each home will have digitally-controlled central heating and air conditioning, a one or two-car garage and optional nanny's quarters.

It is the rapid pace of development of Pudong in the east of Shanghai which makes the project viable. Still, Shanghai
Links is rather isolated, so it is essential to have good infrastructure. A new road will be in place by November, halving the cur-rent drive-time to central Shanghai. It will bring Lujiazui to within 20 minutes and the Bund within 30 minutes. Additional transport connections will include the new airport in Pudong, which should be open in 1999, and a metro line extension just 15 minutes walk away.

Proximity to work

All this luxury and convenience come at a price that only those with the most generous allowances can afford. House rentals can be as much as US$20,000 a month, while individual golf course membership, with transfer rights, is US$60,000.

With 50 formal home leases already extended and over 100 in the pipeline, these are prices which many seem pre-pared to pay. Major investments by multinationals in Pudong and the emergence of the area as the financial centre of the city is persuading more overseas staff to consider living in the east of the city. A survey by Jones Lang Wootton revealed that while 96 per cent of expatriates living in Puxi said they wouldn't want to move to Pudong, 60 per cent said they would consider the move if their company relocated there. Mr Michael Cayley, Shanghai Links marketing director, says the project should command most of Pudong's Grade A office space for the foreseeable future.

But more than just being conveniently located, Hornish says all the firm's executive committee are excited about the move. "Most of the people are very pleased about the quality ?especially the amount of green and open space. The proximity to work and school is also important."

Over time, foreign companies will want to replace expatriate managers with locals and this might affect the residential side of Shanghai Links' business. For example, SC Johnson was originally going to take out 10 or more units, but then scaled down its requirement on the basis of an anticipated decrease in expatriate workers.

Hansen doubts whether the process of replacement in China is really going to happen in the.short-term. Cayley cites the estimated 200 expatriates who will be working on the GM project in Pudong. He also points to independent studies suggesting that 40,000 expatriates, in-cluding overseas Chinese, currently live in Shanghai and that the total is growing at 46 per cent a year.

"The number of multinational companies which will be able to reduce expatriate staff over the next 10 years is al-most zero, " says Hansen. "There's too much growth to manage."

Living in a compound

Sealand has a 40 per cent interest in the Shanghai Links project, with the remain-der taken by a consortium of investors, headed by Bankers Trust and including New York Life and an affiliate of Hongkong Bank.

The additional capital gives a vote of confidence to the international corporate community, says Hansen. "It serves as good notice to multinationals that the project is going to get done," he adds.

This US$50m injection announced in May was well timed as there were doubting voices. "We have been told in the past that the first houses would be up and running in six months but this has not happened," says one Shanghai-based property executive.

Others take a more pragmatic line. "Like most projects in China, they are a little bit behind schedule," says Dupont's Marchuk. The reason for the delay is be-cause the American School wanted to change its location within the community, a decision which had a major repercussion on the layout of the whole project.

One lingering undercurrent of concern is the way projects such as Shanghai Links reinforce the divide between locals and foreigners. Why come to China, some ask, only to live in a community so divorced from the country's culture and history?

By creating a retreat where the homes are only for non-mainland Chinese, there is even talk of a throwback to the days of foreign concessions.

Hornish says the exclusivity of the project, in many ways divorced from real China, is a major drawback: "It does concern me that it will be a little community, out of touch with local Chinese."

Hansen admits that such criticism is fair but he adds that it's the only way to attract top quality overseas staff with school-age children. Others counter that most expatriates are already living in compounds, with family mobility limited to the company car. One expatriate lawyer living with his family in Shanghai says there are just too many hassles to contemplate living outside a compound. "For one thing, our children are able to catch the school bus," he says, "and it's easy to organise a visit by a plumber or electrician if something needs fixing."

Notwithstanding these concerns, the consortium is confident about future prospects. Because the housing is being leased to multinationals, Sealand says the risks are 'dramatically' lower than for most investments in emerging markets. This is why the consortium is relaxed about returns over a longer period than normally associated with construction projects in China.

Sealand hopes to build 16 such projects in Asia. Five are slated for main-land China ?Shanghai, Beijing and Guangzhou and possibly Dalian and Nanjing. Last month, it emerged that the consortium is to build 1,000 luxury properties on a 182-hectare site in Beijing. This would put it on an even larger scale than the Shanghai Links project.