How the children of China’s newly rich invest in Australia

The fu er dai

This insecurity complex Australia has quietly embraced, and to understand its significance requires a recalibration of the narrative around Chinese investment into Australia. For the most part this has been fixated on trophy homes, luxury handbags and the construction of high-rise inner-city apartments. Less visible has been this new generation of immigrants who were born in China, educated in Australia and are now beginning to make a mark on their adopted country. Armed with patient, long-term capital from their families and a cultural fluency suited to an increasingly global economy, they are proving adept at spotting opportunities others have missed.

These are the fu er dai, or children of China’s newly rich. Traditionally shy about any publicity, they are only now being coaxed out of the shadows as they take on increasingly ambitious and high-profile projects.

Among them is Mai, now a venture capitalist and property developer, whose ICD Property has $2.3 billion worth of hotels, resorts and housing projects under way across Australia and New Zealand. These include a complete refurbishment of Sydney’s City Tattersalls Club, a Melbourne high-rise, a land development in Geelong and a golf resort on Kangaroo Island.

Another of the fu er dai is Louis Li, owner and creator of the hotter-than-hot Jackalope Hotel on Victoria’s Mornington Peninsula. Li, 30, is now focused on taking the much-loved strawberry watermelon cake, from Black Star Pastry in Sydney, to the world. He’s also building a hotel-cum-art installation in Melbourne’s Flinders Lane.

Chinese-Australian businessman Louis Li: “I’m always going to try harder … that is the spirit of Chinese entrepreneurs and creatives.”
 Kristoffer Paulsen

Like Jewish migrants

And then there’s Jin Lin, whose Aqualand Group is building towers at Sydney’s Barangaroo among a development pipeline worth $5 billion and an investment fund that will have $1 billion of family money within four years.

All three of those profiled by AFR Magazine are under 40, edgy, entrepreneurial and largely disconnected from Beijing’s campaign for influence and prestige outside China. Their drive, and their desire to get on with business, harks back to the wave of Jewish migrants who arrived in Australia after World War II, some of whom became our most celebrated entrepreneurs.

It’s a comparison that sits comfortably with Mai, who says his model for doing business in Australia is the Jewish families of Melbourne, some of whom have become his mentors, including Ian Davis, a former chairman of partners at law firm Minter Ellison, who sits on his advisory board.

“They are successful, smart and united,” says Mai. “They have strong family values, give back to the community and have integrated well.”

Nearly two years after the unconventional Jackalope on the Mornington Peninsula opened, owner Louis Li is preparing to begin construction on the second iteration of the hotel, this time on Melbourne’s Flinders Lane.  

Family is business

As our chauffeur-driven van heads towards Geelong, where ICD has a development, Mai, in his Armani suit and $19,000 watch, talks about family and the occasional failure he’s had along the way in meeting his parents’ expectations.

“The family is the business,” he says. And so four times a year he heads to Shenzhen and reports on the progress of the Australian outpost to his father, who he surprisingly describes as “easy going” and “casual”. Mai Boliang’s good humour does not extend to understanding his only child beyond the realms of business, however. “He does not know what food I like or sport I watch,” says Mai, “but he’s taught me a lot.”

In 1998, aged 15, Mai was sent to board at Melbourne’s Scotch College. As he tells it, the school was chosen over other bastions of the establishment, as his parents were impressed with the headmaster’s insistence he repeat a year to improve his English. “Chinese parents are crazy,” Mai says laughing. “They want a school which will be tough on their kid.”

After four years at Scotch, he followed a well-trodden path to Melbourne University for a commerce-law degree, but then diverged sharply from the family’s expectations.

The Rain Room will have its permanent home at the new Jackalope hotel in Melbourne. Random International

“It was not that I dropped out of university … more that they told me it was not for me,” he says, laughing once more. “I was born into a good family with a good IQ, but that made me very lazy.”

CIMC hits and misses

More failure would follow when the then 23-year-old, with no experience in property, set about revolutionising the construction of residential apartments in Australia. At the insistence of his father, the younger Mai sought to bring CIMC’s modular housing, which was mainly used in remote mining camps and hotels, to inner-city Melbourne. It failed slowly, as each tiny change demanded by local councils decimated any savings that would eventually be reaped from shorter building times.

“My father thought we had not tried hard enough,” says Mai. “After three years I finally convinced him it was not going to work.” That failure cost the family $2.7 million – a figure Mai has hard-wired into his memory – but one that taught him enough about the property game to recast the business along more traditional lines.

This time he hired a young team, including a friend from Scotch, Matthew Khoo, and settled on a model of finding tricky sites, often with contamination issues, where a vendor was prepared to accept a long settlement.

Jin Lin’s Aqualand Group is building towers at Sydney’s Barangaroo among a development pipeline worth $5 billion. Jessica Hromas

After two successful smaller developments of 50 and then 60 apartments, Mai launched the 63-level EQ Tower in Melbourne’s central business district in 2014. The timing could not have been better, as Chinese buyers and lax lending standards pushed property prices ever higher – 80 per cent of the tower sold in just eight weeks.

Not a ‘crazy rich Asian’

The tower, backed by Chinese developer Sino-Ocean, has won a swag of awards for its design and public amenities, which include cinemas, karaoke rooms, an outdoor lap pool, yoga studio and an elevated garden.

It’s also home to HWKR, a rotating Asian-themed food centre with five restaurants and a bar, which Mai’s Chinese-Canadian wife Hilary Mai helps to run. She met Mai through mutual friends while on holiday in Barcelona and now oversees the permanent bar and coffee shop within the centre, which donates profits to local charities. “We are the only tenant that won’t get kicked out,” Hilary Mai says.

One Melbourne financier who has worked with Mai says unlike many Chinese developers, Mai has not come to Australia and overpaid for big sites. “Michael’s put together a young, creative team who are determined not to do cookie-cutter apartment projects,” says the financier, who asks not to be named. “This should help him be successful in the longer term.”

The financier says while there is substantial family money back in China, it’s not in the sphere of “crazy rich Asians”. That means unlike many Chinese investors, ICD is seeking commercial returns in Australia, rather than simply looking for a hedge against political instability back home. Bringing in equity partners such as Sino-Ocean on the EQ Tower, and needing to raise senior and mezzanine finance, is further proof, say those who have dealt with Mai.

Jackalope version 2

Having bought the Willow Creek Vineyard outside Melbourne in 2013, the parents of Louis Li might have expected their son’s first property project in Australia to be something akin to a three-star Country Comfort hotel.

Instead, they got Jackalope, likened by Gourmet Traveller magazine to an “alien spacecraft” landing in the sleepy vineyards of the Mornington Peninsula – all charred timber buildings and neon-lit corridors, spliced with contemporary art and craft cocktails. “I did not give them [my parents] any idea what I was doing,” says Li. “The first time they saw it was on the opening night.”

Nearly two years after the $40 million hotel opened, Li is preparing to begin construction on the second iteration of Jackalope Hotel, this time on Melbourne’s Flinders Lane. And once again it won’t be a conventional hotel, even if his parents are now more attuned to their son’s style.

Michael Mai was groomed from an early age to eventually leave China and establish the family offshore.  Kristoffer Paulsen

Unlike the newly formed Mai Family Office, the Li’s Australian outpost is solely the creation of Louis, who came to Melbourne in 2007 to study film at Swinburne University and then completed an MBA at RMIT.

“My family has zero involvement,” he says. “They wanted to invest overseas so it was about me doing a favour for them.” That “favour” has so far seen the family invest at least $110 million in Australia and there’s no indication they are close to being finished.

The Rain Room

Last year Li purchased Black Star Pastry, home of the strawberry watermelon cake, a concoction of almond dacquoise, rose-scented cream, watermelon and strawberries that has become a favourite for office farewells and upmarket weekend barbecues. The cake is reputedly the world’s most Instagrammed dessert.

Li’s transformation of that brand, a favourite with Chinese tourists and locals alike, is under way. But an even bigger focus this year will on be St Kilda’s storied Prince of Wales Hotel, which Li purchased for a reported $45 million in 2015, and the historic Maria George building on Flinders Lane, bought a year earlier for $11.5 million.

There has been much speculation about what Li would do with both sites. Over lunch with AFR Magazine at Bills in Sydney’s Surry Hills, he reveals plans to bring the immersive art experience, known as the Rain Room, to Melbourne.

The installation, which has been featured at institutions such as New York’s Museum of Modern Art and the Yuz Museum in Shanghai, will have its permanent Australian home at the 11-storey Jackalope Hotel on Flinders Lane.

What makes a ‘good hotel’

While that is being built, Rain Room will be housed in a 100-square-metre blackened room on the top floor of the Prince of Wales Hotel in St Kilda. Set to open mid-year, its premise is that visitors can control the rain by walking through the equivalent of a tropical downpour without getting wet. According to its creators, Random International, the work explores “the roles that science, technology, and human ingenuity can play in stabilising our environment”.

The Rain Room attracted 200,000 visitors a year in Shanghai. It will be in St Kilda until 2020 and then at the new Jackalope. Li’s idea is to build a hotel around the installation and connect it with other pieces of sculpture and contemporary art. “For me, the question is how do you merge art and science into hospitality,” he says.

The strawberry watermelon cake that Black Star Pastry owner Louis Li believes will one day displace the lamington.  Stephen Claxton

In Li’s mind a “good hotel” should be a product of the owner’s obsession and a summary of that person’s inner life. To this end he had a hand in every facet of Jackalope, down to choosing the butter knives.

As Li tells it, he didn’t plan to stay in Australia long term, but after learning English was so taken by Melbourne’s intimate, grungy culture he decided to stay. Hotels seemed an obvious first step in business, as this is the family’s craft back in the southern Chinese province of Yunnan, a domestic tourism hub which has boomed in recent years on the back of Tiger Leaping Gorge, snow-capped mountains, terraced rice paddies and cities such as Shangri La.

US and China next

His family, who he describes as land developers, run three hotels under the “Cloud” brand in Yunnan and also lease properties to international chains Hyatt, Banyan Tree and Accor. “They are not design-centric hotels but they are relaxed, comfortable and poetic,” says Li. “I thought about extending the brand in Australia before deciding to do something myself.”

That something starts at $675 a night for one of Jackalope’s 45 rooms on the Mornington Peninsula, rooms that have accommodated everyone from Melbourne locals to Hillary Clinton. “She asked when I was going to open in the US,” says Li. This is certainly on his agenda, but he’s equally likely to push back into China, where an increasingly established affluent class is demanding unique experiences, rather than just luxury brands.

China and the rest of Asia is also the ultimate prize for Black Star Pastry, which pastry chef Christopher Thé opened in Sydney’s Newtown and has expanded to four outlets.

Li believes Thé’s strawberry watermelon cake, created in 2008 for a friend’s wedding, will one day displace the lamington as the cake that defines Australia. But first he plans to hone the brand and roll it out across Australia. “It has to be edgier and more innovative. It has to be crisper and more current so the product can shine.”

Ultimately Black Star, Jackalope and the Rain Room are tourism plays, aimed at capturing some of the 1.3 million Chinese who visit Australia each year, in an industry worth more than $40 billion annually. But all three projects also combine the very Chinese idea of a destination venue or a unique product which is required to stand out in the saturated mainland market.

“In Shanghai you might have more than a hundred bar options in a single neighbourhood … so you have to try harder,” says Li. “I’m always going to try harder … that is the spirit of Chinese entrepreneurs and creatives.”

Li also predicts the emergence of a contemporary Chinese style. “The new generation don’t want to be seen as the biggest spenders, they want to be the top of the creative chair,” he says. It’s a reference to the term tu hao, which has entered the Chinese vernacular in recent years, and is the ultimate putdown for those with money but no style. Li is determined not to be one of them.

Apolitical business focus

To date, the best-known Chinese entrepreneurs in Australia have been property developers such as Huang Xiangmo and Chau Chak Wing, who feature on the Financial Review Rich List and are perpetually controversial for their political donations and perceived closeness to Beijing.

They sit among the first generation who acquired wealth under the Communist Party and brought it to Australia, making headlines more for courting politicians and buying waterfront property than for their business success.

Like them, Jin Lin drew plenty of attention to his family when buying Villa Igiea in Sydney’s Vaucluse, on Christmas Eve in 2015 for $52 million. He has since commenced a $22 million renovation.

While extravagant in the extreme, Lin is keen to cultivate a different image from Huang and Chau, through those who help manage his local operations. “Our heritage is Chinese but we are an Australian company,” says Wayne Mo, who is running an investment fund for the Lin family’s Aqualand Group.

‘Politics not our thing’

The former ANZ executive is speaking to AFR Magazine on behalf of Lin, who remains reluctant to discuss the family’s Australian business given the sensitivity around offshore wealth back in China. Aqualand, whose chairman is former Howard government minister Warwick Smith, has assiduously avoided any hint that the company or family is seeking to mould Australian foreign policy or influence local politics. “We don’t want to be involved,” say Mo. “We’re always respectful of both governments [China and Australia]. Politics is not our thing.”

Like his fellow Chinese-born entrepreneurs, Lin started in the family business – property. The 30-year-old, who came to Australia for high school and stayed on for a finance degree at Macquarie University, has $5 billion worth of developments under way across Sydney, through Aqualand.

But the longer game for the family from the southern province of Fuzhou is to gradually diversify into an investment fund that will do everything from private debt to traditional equities and, most importantly, early-stage technology.

“This is an area where Australia has often struggled,” says Mo, who views the anaemic Australian start-up scene as a big opportunity. Patient capital and connections back into China is what the family can offer – the so-called smart money Australian companies often lacked in the US. And while Silicon Valley is still the main game globally, China is becoming a significant market for the commercialisation of new technology, particularly around renewable energy and mobile payments.

“We will only invest where we can add some strategic value or can help with connections back into China,” says Mo.

For the Lins, such connections run deep. The family patriarch, Yi Lin, started his working life as a local-government official, before moving into logistics and transport. It was only when a load of concrete got damaged by water and the customer refused to pay that he used the opportunity to become a building contractor. His move into property development once again came after a client didn’t pay for a building job.

“It’s a very Chinese story,” says Mo, who notes the Shenglong group is now among the mainland’s top 50 developers, these days focused mainly on the southern province of Guangzhou. Some of that property-derived fortune, estimated by Forbes Magazine at about $US1.2 billion in 2017, has been used to seed the family’s investments in Australia. These include four high-end apartment developments hugging Sydney harbour and housing lots in the city’s west.

Overlooked opportunities

Common among all three entrepreneurs is a combination of capital and an alternative world view that has allowed them to seek out opportunities missed by others. “If we compete in a traditional way there is no way we can win,” says Michael Mai.

Perhaps the best example of his company seeking out tricky sites that others tend to avoid is the old cement works in Geelong, which Mai took AFR Magazine to see in late December. Bordering the storied Geelong College, the Moorabool River and a public golf course, the previously contaminated site is now part of a $200 million urban renewal project that will eventually have 1200 housing lots, a town centre and riverfront gardens.

But the area is most famous for its giant murals, featuring three local identities on the disused face of the old cement works silos. Once a symbol of Australia’s rust belt, looking down over Geelong, the silos, on land adjoining Mai’s site, are now an attraction in themselves, touted by TripAdvisor and Lonely Planet. They are even good enough for the royals, with a photo of the silos being given to the Duke and Duchess of Sussex during their Australian tour in October.

It’s a non-traditional approach that has Mai now looking to take the next step into the mid-tier of Australian developers. Perhaps more significantly, the Mai Family Office is, like that of Jin Lin, moving out of property into private equity and venture capital with the establishment of a $10 million fund.

The aim is to help Australian companies make it in China, where connections, or the so-called smart money, is crucial. The step-up in activity will make for a frenetic period ahead, as the Mais are expecting their first child mid-year. In preparation, Michael looks to be in training. He’s trying to give up smoking and no longer eats lunch. “Food slows me down,” he says.

The Innovation issue of AFR Magazine is out on Friday February 1 inside The Australian Financial Review.

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