Leasing firms chase own Olympic gold

作者：ZHU BORU

 (Business Weekly 07/08/2003) 

    To take a bite from the Olympic cake, or not to take that bite. That is not the question many leasing companies are asking as they ponder their roles during the 2008 Beijing Olympic Games. 

    Instead, they are trying to figure out how to best prepare for the Games, and how to introduce themselves to the organizing committee of the Games.

    "We have already signed two deals to purchase facilities to be used during the Games," said Ni Jiting, president of Shanghai Golden Coast Enterprise Development Co Ltd, in a recent telephone interview.

    One, signed with France-based MGE UPS System, involves a facility used to protect data stored in computers, she explained.

    The other partner is Beijing-based Fitness & Health Trade Co Ltd, an agent for top-brand bodybuilding equipment made in the United States, France and Italy.

    "They will be installed in the eight gymnasiums at the Olympic Village for athletes to train daily," she said.

    The organizing committee would then pay Golden Coast - if they reach an agreement - for the facilities before 2008.

    In other words, Golden Coast will transfer ownership of the facilities through a financial-leasing deal with the organizing committee.

    "We have extensive leasing experience in grand events, including the 1996 Atlanta Olympic Games, the 2000 Sydney Olympic Games and the 2001 APEC (Asia-Pacific Economic Co-operation) meeting in Shanghai," Ni said.

    "We are confident."

    Golden Coast - China's largest, comprehensive leasing company that provides financial and operational leasing services - is the only Shanghai-based leasing firm among Shanghai's companies discussing with the organizing committee officials potential opportunities during the 2008 Games, Ni said.

    Those discussions, originally scheduled for April 28-30, were postponed to this month due to the outbreak of severe acute respiratory syndrome (SARS).

    Other domestic leasing companies have also expressed interest in Olympic-related business, although they have not released detailed business action plans.

    "Surely it's a golden opportunity for us," said Gao Hongfei, president of China National Foreign Trade & Financial Leasing Corp.

    "We know from the past few Olympic Games that leasing can play an important role."

    Gao's company is one of the 12 members of the Financial Leasing Professional Committee affiliated with the China Society of Finance, an association of financial institutions.

    Leasing companies could benefit from Olympic-related fixed-asset investments - including spending for sports facilities, machinery used to construct Olympic buildings and service facilities, Gao said.

    "But it's only a general idea, and we have no detailed plans. In addition, we are not sure how much money is left in the Games' budget for leasing," he added.

    Tian Qing, senior engineer and the committee's secretary-general, said most member companies are eager to contact the Games' officials.

    Some Sino-foreign joint-leasing companies, such as Shanghai Deere Rental Equipment Co Ltd, are more aggressive.

    "An important reason for our decision to establish our Beijing subsidiary was to get closer to the Olympic leasing market, so we could act more quickly than other firms,," said Li Dahang, general manager of Deere's Beijing subsidiary, in a recent telephone interview.

    The subsidiary was founded in August, 2001, soon after Beijing won the bid to host the Games.

    Now, Deere is well established in Beijing's construction-facilities-leasing market, Li said. 

    "We have expressed our interests to the fiscal department of the organizing committee," he said.

    "Now, we need some help from the local industrial association to contact project owners."

    If the leasing agreement is signed, Deere will prepare emergency solutions for dismantling and installing equipment used in stadia and gymnasiums during the Olympics, Li explained.

    Li was referring to the Beijing Association of Leasing Industry, which is preparing to host a meeting on Olympic leasing.

    The First China Leasing Industry Forum, which will be attended by representatives from leasing firms and the organizing committee, will explain the benefits of leasing during the Olympics and provide business opportunities, said Zheng Qinglin, the association's secretary.

    The meeting, originally set for July 18, has been rescheduled for October due to the SARS outbreak.

    The organizing committee will surely consider introducing leasing to the Games, but it is too early to comment on a practical plan, said Yu Lei, the committee's press officer. 

    "We hope our introductory meeting will promote co-operation," Zheng added.

    Business to save for Games

    The 16-day Olympics offers a myriad of lucrative business opportunities - including those for leasing firms, most of which will supply equipment.

    It would cost at least 30 billion yuan (US$3.6 billion) to purchase equipment for the Olympics.

    But approximately 20 billion yuan (US$2.4 billion) worth of equipment can be leased, notes Sha Quan, with First China Lease Industry Forum.

    Leasing firms could earn a combined 600 million yuan (US$72.3 million) in profits during the Games, Sha said.

    The figure is based on the industry's average 3-per-cent profit rate.

    Fixed-asset investments will account for about 60 per cent of the 130 billion yuan (US$15.67 billion) worth of Olympic-related investments.

    Leasing, Sha predicted, will cut fixed-asset investments in half.

    Li Hongzeng, president of Beijing Association of the Leasing Industry, was impressed by the "hundreds of millions of dollars saved through leases" during the 2000 Sydney Games.

    "As a result, I suggested introducing leasing into the 21st Universiad, held in Beijing the following summer, when I realized the budget did not cover total expenses," Li Hongzeng said. "Operational costs of the Universiad were reduced by nearly 10 million yuan (US$1.2 million), or one-third of the budget."

    That marked the first time leasing firms and a sporting event had worked together in China. However, due to insufficient experience and inadequate preparation, the leases were limited to the events operational services.

    "It was a good beginning. We expect better leasing services during the 2008 Olympic Games," Li Hongzeng said.

    A lot of equipment - including construction machinery, transport vehicles, facilities for TV broadcast relays, environment harness facilities, sports facilities, elevators and car parking facilities - can be leased during the Beijing Games.

    Experts agree most of the leases during the Olympics will involve various kinds of equipment.

    Leases fall into one of two categories - financial leases or operational leases - depending on how the equipment will be used after the Games.

    Operational leases, which people are most familiar with, involve paying rent for the temporary use of the equipment.

    Although the lessee pays for the right to use the equipment, the lessor continues to own the equipment, said Shi Yanping, director of the Leasing Research Centre of the University of International Business and Economy.

    Items likely to be rented during the Games include office facilities, tables, chairs and dinner sets in restaurants, TV sets and video cameras, medical facilities and bodybuilding facilities.

    Financial leases are designed to help raise funding for a long-term investment. In other words, this method is used to purchase expensive articles or buildings which the renters cannot afford to immediately pay off.

    Under a financial lease, the lessee pays for the equipment in installments, similar to a mortgage. However, a financial lease is more expensive - due to higher interest rates - than a mortgage.

    The lessor transfers ownership to the lessee at the end of the agreement, Shi said.

    Financial leases will best serve Olympic-related fixed-asset investments, such as stadia, the Olympic village and sports facilities, Tian said.

    Experts suggest, however, there might be few opportunities during the Beijing Games for leasing companies, despite massive opportunities during past Olympics.

    The organizing committee of the Sydney Games used financial leases for several projects, and sold those projects after the Games, Li Hongzeng said.

    "Sydney pulled down its Olympic village after the event. It's a different story for Beijing," he suggested.

    "Beijing's municipal government needs the 2008 Olympics to boost the capital's infrastructure construction.

    "Olympic buildings will continue to host public events or serve as accommodation after the event. Therefore, the government is expected to invest heavily," Li Hongzeng said.

    Financial leasing is not a practical option for the construction of Olympic stadia and gymnasiums, as various taxes and fees would push the costs much higher than other forms of leasing, Gao said.