China’s Property Developers Consolidate.
Greenland Holding Group has revealed plans to buy a 60 percent interest in luxury property developer SPG Land Holdings, a move that might usher in a new age of Chinese property consolidation. According to the Wall Street Journal, the sale would be the “largest-ever acquisition of a controlling stake in a Hong Kong-listed Chinese real estate developer by value.” The headline in the Journal read, “Consolidation in China’s Property Sector Appears to Be Underway.” apartments for sale qatar
Greenland, a state-owned company based in Shanghai, said in a filing that the investment “would boost the group’s financial situation, increase the group’s profile in Hong Kong and China, and allow the group to benefit from Greenland’s strong support and resources.”
In an endeavor to offload underperforming enterprises, SPG will sell a 50% stake in Peninsula Shanghai to its chairman Wang Weixian for $175 million. According to Moody’s Investor Service, this asset has been losing money for SPG for the past two years, and the new entity is currently being reviewed for a possible rating upgrade.
SPG Land, a developer of big, high-end residential, commercial, and holiday developments, has been seeking for ways to increase its liquidity. According to Bloomberg, the investment from Greenland and the sale of the Peninsula would allow the firm to raise a total of $561.5 million, which will be used to pay a special dividend, repay current bank loans, and fund projects with the remaining net revenues.
SPG shares resumed trading in Hong Kong yesterday after being suspended on April 19, according to Bloomberg. SPG will change its name to Greenland Hong Kong Holdings Ltd.
As China’s property policies tighten, huge real estate businesses will have the ability to buy out faltering developers or projects, a strategy that is unusual in China. Faced with a deteriorating home market, several Chinese developers are looking for projects in the United States.
Japan is a ‘Market to Watch’ in terms of real estate.
In the first quarter, direct investment in global real estate reached its highest level since 2008, owing to a boom in commercial property investment in Asia Pacific.
According to Jones Lang LaSalle’s most recent capital flows report, more than $27 billion was directly invested in Asia Pacific commercial real estate in the first quarter, a 26 percent increase over the same quarter in 2012. Domestic transactions accounted for $20 billion of the total, while cross-border transactions in the region fell by 24% year on year.
According to Stuart Crow, head of Asia Pacific capital markets at Jones Lang LaSalle, Japan is “one [market] to monitor.” Property investment in Japan increased to $10.6 billion, up 32% from a year earlier and 38% from the preceding quarter.
According to Jones Lang LaSalle, Japan’s huge surge reflects “a widespread improvement in sentiment across the economy, with consumer confidence at a five-year high and a cheaper currency that will assist to boost the massive export market.”
Mr. Crow stated, “We foresee a boost in investment activity in the country, as good indicators emerge following statements on stimulus measures aimed at reflating the Japanese economy.”
The total gain in Asia Pacific real estate, according to JLL, is due to continuous quantitative easing, which has expanded liquidity and lowered debt costs in Asia. Investors from Asia Pacific raised their overseas property commitment to $2.6 billion, up 45 percent from a year earlier, with an emphasis on office and hotel assets in Paris and London.
“We expect transaction volumes in Asia Pacific to climb to USD110 billion in 2013, which is roughly 12% higher than last year,” said Stuart Crow, Jones Lang LaSalle’s head of Asia Pacific capital markets.
Transactions in Hong Kong increased by 68 percent year on year to $3.3 billion.
Global direct property investment was $105 billion in the first quarter, the largest quarterly total since 2008. “The amount of money pursuing real estate has dramatically increased,” according to JLL.