(Yicai Global) Nov. 9 -- With China’s real estate sector under pressure, now is a good time for mergers and acquisitions in the property management services field, according to the president of Shimao Services.

The Shanghai-based property management unit of Chinese real estate giant Shimao Property Holdings plans to use 80 percent of the HKD4.82 billion (USD619 million) it raised earlier this month in a share placement and bond issue on M&As, Ye Mingjie told Yicai Global in a recent interview. The rest will be used for expansion and working capital.

M&As in the sector have entered a window period, which may not stay open for long, as there has been a marked increase in the number of quality assets available in the market, according to Ye.

“Things will be different in the future,” he said. “But what we can do now is be aware that the current situation is better than the past.”

A recent rumor had it that Aoyuan Healthy Life Group, another property manager, was looking to sell its equity, with Shimao Services touted as one of the potential buyers. Shimao was unwilling to commit either way.

Shimao’s change of attitude toward M&As reflects the deterioration in the overall operating environment of the real estate industry over the past six months or so. The Hong Kong-listed firm’s potential M&A targets were “higher in prices, but lower in quality than the past,” managers said at an earnings conference in March.

“The industry was racing ahead in leaps and bounds,” Ye said. “Everyone wanted to go public. But now there are very few that want to.” The real estate market has been too difficult in the current half, he added.

‘Relative Prices’

Though there are more high-quality assets on offer and so more options, in Ye’s view “asset prices are relative, and the key is to see whether the asset a company buys is the best for itself.” The criterion for ‘best’ is whether the asset can form a synergy with the firm’s existing business, has scope for sustainable development and can supplement the firm’s capacity and resources, he added.

“Whether an asset is expensive or cheap is not decided immediately but depends on whether it can realize its value,” Ye noted.

Shimao generally conducts M&As to improve its scale and capacity but will not buy land nationwide just to boost its scale, he said. “The firm mainly goes in for M&As in comprehensive property and urban services and will also do so in diversified value-added services and digital technology.”

Shimao will consider the scale and spending power of consumers as well as other factors when choosing a target city for its services. “We’ll provide many value-added services and so will choose cities with greater growth potential.”

Shares of Shimao Services [HKG: 0873] have been falling since the end of June amid a sluggish industry. Its stock hit a record low of HKD10.22 (USD1.31) today close 11 percent lower at HKD10.40. The Hang Seng Index edged up 0.2 percent.

Editors: Tang Shihua, Peter Thomas