For Immediate Release

September 5, 2003

Sun Hung Kai Properties' (SHKP) commitment to developing premium-quality homes with heart has gained it an outstanding market reputation. And while costs have fallen generally, the company has achieved even further savings on construction costs through superior management. SHKP's vertical integration, sophisticated construction management, bulk purchasing, systematic outsourcing and the adoption of new building techniques have produced a 30% reduction in overall construction costs over the past five years.

SHKP Executive Director Mike Wong said, "SHKP never compromises on the premium quality of its developments, but following the principles of speed, quality and efficiency, we create the best products in the shortest time, using manpower and resources in the most efficient and safe way. In response to recent market trends, SHKP monitors construction costs closely to eliminate waste, improve margins and obtain the best returns for our shareholders."

Vertical integration

Vertical integration helps SHKP maintain premium quality and reduce costs. The company has a full range of expertise in house, from project planning, design, construction, material procurement, mechanics, engineering and concrete batching, to quality control, landscaping, sales and property management. This allows SHKP to use supply chain management and benefit from seamless integration. Effective communications between the various departments also increases efficiency and ensures top quality.

Superior construction management

A construction project involves thousands of steps, so SHKP has its own construction department to manage projects and provide procedural guidelines and quality standards. The result is more effective management. Extensive experience enables the department to increase operational efficiency, for instance, knowing the best way to store materials to avoid waste. As such, SHKP spends only half as much on construction management as most major construction companies do.

Bulk purchasing

The number of projects SHKP builds every year allows it to purchase materials in bulk for less. Since quality is the first consideration when choosing materials, imported European products are usually selected even though they cost more. Nonetheless, bulk purchasing still produces discounts. Other factors that help to lower construction costs include the strong US dollar, which means imported materials can be bought for less, and ordering the precise quantities required save on storage costs.

Systematic outsourcing

SHKP uses a variety of contractors with different specialties, and it pays particular attention to their quality. Contractors are given clear instructions and monitored closely, and all receive performance ratings. Because SHKP can offer a steady flow of work and always pays on time, contractors are willing to tender more competitive bids, which in turn lowers SHKP's costs.

New techniques

New products and building techniques are used whenever appropriate, such as pre-fabricated wood products and finishes, and some materials are processed in the factory instead of at the construction site. SHKP also pays special attention to the quality of its staff and contractors. They receive thorough training on areas like construction management and safety, wooden formwork, fixing steel reinforcement, laying floors, masonry, decorating, fitting out and more. Several thousand people are trained every year to improve their knowledge and techniques.

Mr Wong said, "SHKP is reducing construction costs while still maintaining high quality. We continue to receive high praise from many of our customers and more and more units have zero defects at handover, which means ever fewer repair requests. These prove that cost reductions have not had an adverse impact on our building quality."

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