Back in November I made something of an impulse purchase of a penthouse in Nairobi; the opportunity was just too good. As I was discussing with the developer, it turned out we planned on being in China around the same time.
I had a trip booked to China with my family on our way to Cambodia.
I added a leg to the trip and we went to the coast near Macau to look at one of the developer’s past projects.
We also discussed why Chinese developers are expanding into Africa and together we visited some of the suppliers they’ve worked with for many years.
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In a world that is gradually experiencing demographic collapse, capital will no longer be able to ignore Africa. Nairobi is poised to be one of the main beneficiaries of these capital flows.
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And as the global African Diaspora continues to grow, guess where they are investing? Back home.
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- Why are Chinese Real Estate Developers Moving to Africa?
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Transcript of “Why are Chinese Real Estate Developers Moving to Africa?”
LADISLAS MAURICE: Hello, everyone, Ladislas Maurice of The Wandering Investor. Today I’m in Chongqing, in China, and I’m about to board a flight to Zhuhai province, right next to Macau. Why? Because recently I bought an apartment from a Chinese developer in Nairobi, in Kenya. And I feel that there is a general misconception out there, which is not entirely true, that a lot of the Chinese developers initially had a textile factory or an import/export business and became developers because they saw a business opportunity, which led to not a lot of professionalism when it comes to developing the actual projects. But now there’s a new generation of Chinese developers in Africa that are actually professional developers in China. So we’re going to go meet that specific developer and look at one of their previous projects to do a bit of research on the ground and have a better understanding of what they actually achieved back home in China before starting operations in Africa. All right, let’s go.
[MUSIC]
Chongqing as a tourist destination
LADISLAS MAURICE: Yeah, so this trip was really not expected at all. I had booked a trip with my family to Chongqing about three, four months ago, and it’s only a few weeks ago that I bought an apartment in Nairobi. So when we were discussing with the developer, I said, “Hey, you know, are you going to be in China around those dates?” And Miss Lee said, “Yes.” So I said, “Hey, how about I fly over and look at some of your some of your previous projects?”
And I recommend Chongqing as a as a destination for tourism. It’s interesting, it’s big, it’s very Chinese, not a lot of international tourism. The food is extremely spicy. I don’t know, it’s a very different place, extremely affordable. We were staying in a nice five-star serviced two-bedroom, two-bath apartment right downtown with breakfast, everything for $90 a night. So really, really interesting. The equivalent of Uber rides around town were dollar fifty, two dollars max in really nice, you know, brand new Chinese EVs. So there’s definitely a lot of value in that. And the flight was interesting. It was Budapest to Chongqing. It was three-quarters full. It’s an extremely affordable flight. You can get flights for five hundred euros return. I think it’s more of a political flight because of all the Chinese investment going into Hungary. Hungary is actually the number one recipient of Chinese foreign investment in Europe, way more than Germany, France, etc. I think that as part of that deal, the Chinese government is sponsoring or subsidizing flights to different parts of China from Budapest. So it was a nice opportunity to just go to China and check it out. And now here we are in Zhuhai.
Overview of Zhuhai, China
LADISLAS MAURICE: So Gao, can you tell us a little bit about Zhuhai here?
GAO: Zhuhai was a fishing village 40 years ago, and now Chinese government developed a lot and it’s a modern city now. The location is pretty prime because it’s connecting to Macau and Hong Kong.
LADISLAS MAURICE: And how many people live here now, roughly?
GAO: It’s about three million people living in this city.
LADISLAS MAURICE: And a lot of manufacturing.
GAO: Yeah, and a lot of factories.
Interview with Chinese developer building in Nairobi
LADISLAS MAURICE: Great, so I just got here. This is the building. There’s a Holiday Inn, there’s a Wyndham, it’s a commercial building essentially, and we are now going to meet with Miss Lee, who’s the chairwoman of this Chinese developer who’s also developing that building that I bought in Nairobi. I bought a three-bedroom penthouse for about a hundred seventy-five thousand dollars, but they also have one-bedrooms starting from, I think, fifty-eight thousand dollars, to two-bedrooms, the most luxurious two-bedroom apartments are a hundred and eight thousand dollars. So pretty affordable. They were talking a pretty big game in terms of the quality that they expect to build. So here we are at one of their projects. Let’s see. It was built seven years ago, so it’s seen seven years of maintenance or lack of maintenance, we’ll see. So let’s do our our research and take it from there. So I was told to go to the 30th floor.
So, Miss Lee, it’s a real pleasure seeing you here a few weeks after Nairobi.
MISS LEE: Welcome to China. Nice to see you again.
LADISLAS MAURICE: Thank you. So we’re really close to Macau here.
MISS LEE: Yes, Macau is just behind us. The place where we are now is called Longfu Building, and right behind it is Macau. Our building is located between the two busiest customs ports, the Gongbei Customs and the Qingmao Customs. It is one of the best locations for real estate in Zhuhai.
LADISLAS MAURICE: So how many projects have you completed as a developer here in China?
MISS LEE: We have been doing real estate development in China for 26 years, and we have completed about 20 projects. We started constructing this building in 2018, and delivered it in 2019.
LADISLAS MAURICE: So this building is 30 floors, just like the building that you’re going ahead and building in Nairobi, where I bought an apartment. Is this a small project for you? Is this a medium, big project? Like what’s the size of it?
MISS LEE: This project is quite different from the one in Nairobi. Even though they are both 30 floors high, this building is a commercial one, whereas the Golden Mansion in Nairobi is a residential one. This building is about 60,000 square meters. For this city, it is a medium-to-large-scale commercial building. For a residential building, it wouldn’t be considered large, but commercial buildings are much more complex in terms of construction, structure, and functions.
Do Chinese developers make good quality apartments?
LADISLAS MAURICE: So, Miss Lee, a lot of people have the perception in some markets that many Chinese developers build poor quality. What do you have to say about this?
MISS LEE: Well, our company has 26 years of experience in real estate development. But even before that, we primarily focused on construction engineering. So our quality is superior compared to many other developers. We have more experience and higher quality standards. For example, the Longfu Building, the exterior is a glass curtain wall. In Kenya, there are no 30-story residential buildings with a glass curtain wall. We didn’t exactly copy this model to Nairobi because the target customers and functions are different. Building such a building is much more difficult and costly. We are one of the top developers. Especially after arriving in Kenya, we found out that some Chinese developments there are not in good quality. We are trying to change people’s perception of Chinese developments by bringing our experience and quality standards to Kenya. That’s why international brands like Wyndham and Holiday Inn are willing to work with us. Our properties in Beijing are managed by Ji Hotel Chain, the largest hotel chain in China. These international brands have very high standards, so their willingness to work with us is a proof of our quality and experience in design and construction.
LADISLAS MAURICE: Look, if the Wyndham and Holiday Inn are willing to set up hotels in this building, it just means that the the standards are high. I know a few developers in the past that have tried to get hotels, etc. and it’s hard. It’s it’s a tough process. You me you need to meet very high standards, high requirements, audits, etc. It’s not an easy task to get big international hotel brands into your commercial building like this.
Quality of Chinese real estate in Nairobi
LADISLAS MAURICE: Do you feel you’ll be able to build the same quality in Kenya as you’ve built here?
MISS LEE: It’s not a problem for us to build a building of this quality in Kenya. We have the technology, the team, and the capital.
LADISLAS MAURICE: I mean to be fair, you go around Nairobi and you see some really nice high-end developments. Um, there’s absolutely the skill set in in Nairobi. You know, if we’re talking of some other countries in Africa, um, I’d be worried, but in Kenya particularly there is a lot, a lot of talent. So one thing is building quality, another is maintaining. And often Chinese developers in many parts of the world have a reputation for not always being great with maintenance. What do you have to say about this?
MISS LEE: We manage the Longfu Building ourselves. All of our properties in Jiangsu, Beijing, and Guangdong are managed by our own property management company. We have different standards for different types of properties: hotels, offices, apartments, or residential areas. We have our own professional team. Our parent company has several branch management companies. We will also manage the Golden Mansion in Nairobi. We will have our own management standards and requirements. We will also send some of our managers to Nairobi to train the local team. We will manage the project with the same standards as in China, while using a localized team. Tomorrow we can go visit some of our material suppliers, like our tile supplier, with whom we have worked for many years. We control the quality of the project from the very beginning of the supply chain.
Inspecting Chinese construction quality
LADISLAS MAURICE: All right, so I guess I now have to walk around the building and go look for some flaws. All right, so we’re going to go check out one of the apartments later on, but this is the kind of reception area really. This is what seven years of wear and tear looks like. Not too bad at all. Look, obviously the the building in Nairobi won’t have the same design and and everything, you know, I can’t say that the the quality is bad of anything I’m seeing here. Let’s put it this way: I’ve seen a lot of Chinese developments in Nairobi and a lot of them do not look like this after seven years. I think that anyone that understands the Nairobi market knows that typically Chinese developments, most of them do not look this good after seven years.
So I’ve been warned that the apartments are really small here, so I’m certainly not expecting the the size in Nairobi. The reason being that the market here is mostly people that work in Macau or in Hong Kong and rent is so expensive there that they just like rent a small place. They leave early in the morning, they come back late at night, and they barely don’t eat in their own apartments. Um, I mean, there’s a big eating out culture in China anyway, so kitchens are less important. I mean, the hallways are nice and clean, really nice and clean. And here we go. All right, so this is this developer’s finishes after seven years of relatively intense usage. That’s kind of cute. I mean it’s like the finishes are all right. It’s not, I don’t see any like deep red flags anywhere in here. Look, I’ll tell you something. I’ve seen a lot of buildings in Africa and also in Asia that were built with that were built by the Chinese and they looked absolutely awful after just two years, like things were just collapsing. I saw some in Cambodia that was that were really bad. I mean here in China there are a ton of them all over. This, I can tell you, is absolutely not one of them. I mean there’s really nothing much to say here. The maintenance is very decent and the quality is, I mean, the quality is totally fair. I mean for the prices that people are paying, totally fair. So if I get this in terms of quality of finishings, I’m not talking about the the design, but in terms of quality of finishings in in my apartment in Nairobi, I’d be very happy for the price that I’m paying, let’s be clear.
Visiting Foshan, China to examine construction materials
LADISLAS MAURICE: Good morning, Miss Lee. So where are we going today?
MISS LEE: Good morning. Today we are going to one of my longtime partners to check on their building materials. We’ll see the difference between high-quality and low-quality materials.
Why are Chinese developers moving to Africa?
LADISLAS MAURICE: So now we’re driving to Foshan, which is another region about an hour and a half away from Zhuhai. So let’s go check it out. So, Miss Lee, you’re a successful mid-sized developer here in China, which in most of the world means a huge developer. You have a nice life here, you’ve had many successful projects. Why are you starting projects in in Africa, more specifically in Kenya, and then not just doing that, but also moving your whole family there?
MISS LEE: We first went to Kenya for a trip. My husband and I have been doing real estate for over 20 years in China. When we visited Kenya and some other African countries, we did some research on the real estate market. We found out that Kenya’s real estate market is at a rising stage. Both leasing and sales are very active. Besides, Kenya’s economy and politics are relatively stable. We were also attracted by the climate. The investment environment is quite good. We thought about it after we returned to China and then decided to start a new business in Kenya.
LADISLAS MAURICE: Yeah, like I I really understand the the reasoning. On a personal basis, I spent most of my twenties in in Africa working for Nestle and my last role there was on the the executive board at Nestle Ghana in charge of the milk business for a few West African countries. And then I left and I’ve been, you know, wandering around the world, investing my money, etc. And I have a few bases around the world with my family and increasingly I am considering making two decisions, right? One decision is potentially acquiring an African citizenship and the second decision is potentially making Nairobi one of my major bases. I see the huge potential in Africa. I lived on the continent, I can feel it, I see it. And originally coming from Europe, I also see the decline economically, socially, politically of my own continent, which makes me sad, I’m certainly not celebrating it, but then I see all the upside in Africa and I think I want to position myself and my family to take part in that upside and to help build as well. So it’s still something I’m pondering, I haven’t made any final decisions yet, but it’s definitely something that is top of mind for me.
So I’ve already bought a few investment apartments in Nairobi, um, four of them at another Chinese developer that were pure investor units, one-bedrooms, one and a half bedrooms. And then also I bought a three-bedroom penthouse from Miss Lee and her development in the GTC in Nairobi. That’s also an investment property. I wouldn’t quite see myself living in that sort of an apartment, that one is really targeting more African businessmen, etc. because of the location. Now the decision is, you know, do I want to potentially buy something for for myself and my family purely from a lifestyle point of view and not ROI driven.
Overview of Foshan, China
LADISLAS MAURICE: Can you tell us a bit more about Foshan?
MISS LEE: Foshan is a famous hometown for overseas Chinese. It has a population of over 10 million. It is a world center for building materials, especially for ceramics and appliances. It is also the hometown for many famous martial artists, such as Bruce Lee, Wong Fei-hung, and Ip Man.
[MUSIC]
LADISLAS MAURICE: So we just arrived at the headquarters of the tile manufacturer, so the tiles that Miss Lee is going to be buying for the development I bought in in Nairobi. And judging by the car park, I don’t think she’s bottom feeding. I mean, the cars are pretty nice here. The cars are on average nicer than what you would find in Western Europe at a tile shop. I can tell you that. Yeah, there are some really nice cars in China. And all these Chinese EVs are really impressive.
Alright, so we’re here with Ruby who’s in charge of exports for Africa. Correct?
RUBY: Yes, welcome to Hongyu.
LADISLAS MAURICE: Thank you. Can you tell us a little bit about your group here?
RUBY: Hongyu Group is established in 1997. We are the top three tiles manufacturer in China. And we have five different factory. The biggest one is more than five million square meter.
LADISLAS MAURICE: Five million square meter.
RUBY: Yes, yes. It’s something like the seven hundred football fields.
LADISLAS MAURICE: All right, so look, I think we all understand that China is big, but I don’t think we really appreciate how big China is. Cool. So let’s go have a look at some of the tiles and the products.
RUBY: Okay, let’s go.
Quality comparison of finishing materials in China
LADISLAS MAURICE: So, Ruby, most people don’t quite understand the difference in quality between tiles and are completely clueless when they go to the shop. Can you elaborate a little bit?
RUBY: Yeah, sure. Okay, you can see here, this is the firing curve of the our production lines. You can see here the firing time and the firing temperature. The firing time will be more than eighty minutes and the firing temperature is more than 1250 degrees.
LADISLAS MAURICE: So this makes a big difference in terms of quality.
RUBY: Yes, yes, because the cost will be much higher, so that’s why our prices will be more different. And the quality is much higher than the other factories.
For the tiles, you can see our biscuit is quite white. It is sometimes is more whiter than the other factories.
LADISLAS MAURICE: Does it mean it’s higher quality, the fact that it’s white? Or is it just the raw material you use is different?
RUBY: Okay, the tiles is something like a paper. If the paper is white, more whiter, the color on the paper will more bright. Okay. So that’s why more factories are more customer will think our tiles are I mean the color, the surface is more beautiful than the other factory.
LADISLAS MAURICE: So now we’re going to go check out a cheaper tile manufacturer to compare the two different products.
All right, so now we are going to the other tile people, but look at the car. It’s kind of it’s kind of cool. It’s got little colors, little stars. Yeah, I have to admit I much prefer Zhuhai and Foshan over Chongqing. We’re in December, in Chongqing it was cold, pretty foggy, fair amount of pollution to be fair. And then we arrived in Zhuhai, I haven’t worn a jacket, it feels less crowded, the food is less spicy, I much prefer it here. And it’s pretty funny. The sales people from the first manufacturer are taking us to the low-quality manufacturer. Um, and they’re like, “Yeah, they won’t know what we’re doing, what we’re filming,” so it’s fine. I mean, the reality is no one has access to YouTube in China. It’s behind the it’s behind the big Chinese, the Great Wall. Um, so it’s very unlikely that this smaller manufacturer will see this video. So here we are at the retailer of one of the other manufacturers, so not directly the manufacturer, but it just gives an idea in terms of quality.
MISS LEE: In China, tiles of different quality can be found in the building materials market. This one belongs to the low-end or common quality. Our company has always been very strict with our quality standards. So we will select the materials of medium-to-high-end quality. We put our project quality and reputation in the first place.
LADISLAS MAURICE: Yes, so this was one of the reasons I initially invested in her development, because I could tell that the quality would be better than a lot of the other competitors out there. But because this group is just entering the Kenyan market, they’re coming unfortunately with the perception that they’re just another cheap Chinese developer. Uh, but they have to prove themselves up front with their first project. My understanding of it is that they’re going doing this first project, trying to get really good quality. They’ll be selling a bit lower than the competitors. So essentially their margins will be very thin on this first project to build the reputation. And as an early investor in this, my bet is that I’ll end up with a product that is better than what the market expected and priced in. So you sold out of the penthouses, correct?
MISS LEE: Yes, the penthouses are all sold out.
LADISLAS MAURICE: What do you have left?
MISS LEE: We still have some one-bedroom and two-bedroom units, which are very suitable for investment. The prices for one-bedroom units are between $60,000 and $90,000, and for two-bedroom units, between $85,000 and $150,000.
LADISLAS MAURICE: Look, I mean regardless of whether you’re interested or not, this video’s not about that. The video really I wanted people to understand that there are different types of Chinese developers entering the market in Africa. They’re too easily portrayed as just one “the Chinese,” but we’re talking of a massive country, massive economy, and people from very different backgrounds doing business in Africa that also results in very different quality in terms of end delivery. Uh, we’ve seen it with Chinese cars, you know, initially they were all bad, and now you have Chinese car brands that are absolutely fantastic in terms of quality and others that are still pretty bad. So just keep that diversity in mind when you’re dealing with some of these Chinese businesses in Africa. Their backgrounds can be very, very different.
Anyways, if you’re interested in this project, you can get in touch with Pratik. He’s the one who introduced me to this. And, Miss Lee, thank you very much for your time here in Zhuhai and in Foshan. It was really, really interesting.
MISS LEE: You are welcome. Welcome to China.
LADISLAS MAURICE: Make sure to download my free ebook, “12 Mistakes to Avoid When Investing in International Real Estate,” which you can find on my website linked below. And feel free to follow me on Instagram at thewanderinginvestor. I look forward to hearing from you.
