Developers build foundations for global growth

Developers build foundations for global growth

Hu Yuanyuan  2013-02-20 09:04:38

Property companies home in on lucrative deals amid slowdown

Chinese property developers are increasingly looking overseas for opportunities created by the global economic slowdown.

China Vanke, the country’s largest real estate developer by market value, has teamed up with the US real estate firm Tishman Speyer Properties to develop a key site in San Francisco, Vanke confirmed this week.

The move marked the developer’s first venture into the US market.

Details of the deal will be released on Friday, the company said.

The deal came after Vanke set up a research team last year to examine development prospects in the US.

The company’s global strategy will be boosted after it announced a plan to move trading of its non-renminbi shares to Hong Kong last month.

Also last month, the Shenzhen-based developer joined hands with New World Development to purchase a residential site in Hong Kong for HK$3.4 billion ($439 million), its first project outside the Chinese mainland.

“After 30 years of development, our go-global strategy is ready to be implemented. And access to an open international capital market is necessary for such a strategy,” said Tan Huajie, Vanke’s board secretary.

Qin Xiaomei, director at the strategic consulting department of Jones Lang LaSalle Beijing, an international real estate service provider, said: “It is just the beginning of Chinese property developers going global.”

Other Chinese real estate companies have made inroads into overseas markets.

Guangzhou-based Country Garden, which trades its shares in Hong Kong, set up a joint venture with Malaysian real estate firm Mayland in 2011 to develop two residential projects, taking a 55 percent stake. This was foll-owed by Country Garden’s development of a commercial complex in Malaysia last year.

These projects, targeting local as well as Chinese buyers, will open for sale this year.

“We are also on the lookout for quality land parcels overseas. If there are appropriate opportunities, we will not miss them,” one of the company’s executives, who requested anonymity, said.

Beijing Capital Land signed an agreement last year to purchase a land parcel in France on which it plans to establish a Sino-French economic zone.

Wanda Group, the country’s largest commercial property developer, has revealed plans to invest $10 billion in the US over the next decade, particularly in hotels, retail and commercial properties.

Developers are following the trail of Chinese buyers of overseas properties, Qin, from Jones Lang LaSalle Beijing, said.

“But a number of institutions are also finding opportunities overseas amid the global economic slowdown.”

Chinese make up the largest group of overseas buyers in the US property market, accounting for 11 percent of sales, Wang Shi, Vanke’s chairman, said on his micro blog.

Qin added that Chinese buyers have been encouraged by the appreciation of the yuan and the government’s tough real estate policies at home to invest in properties overseas.

“We have noticed a growing enthusiasm among Chinese investors to buy overseas real estate, and the UK and the US are their favorite markets.”

Meanwhile, institutional investors from China are also active in examining overseas opportunities.

China Investment Corp, the country’s sovereign wealth fund, is reportedly one of a trio of Asian investors vying to buy an 800 million pounds ($1.3 billion) office complex in London. The Financial Times, citing unnamed sources, said the deal would be the most expensive property deal in the UK since the start of the financial crisis in 2008.

“A number of real estate funds and property developers have contacted us seeking bargain projects overseas,” said Zhang Ping, head of research in Beijing for the international real estate service provider Cushman & Wakefield.

According to Zhang, compared with international competitors, Chinese property investors are sometimes a bit slow in the decision-making process, and as a result have missed some good prospects.

“In some cases they are still unfamiliar with the legal and investment environment in target countries, but generally I think they are still a bit conservative.”

Warren Buffet: U.S. property market is recovering

Warren Buffet: U.S. property market is recovering

American billionaire Warren Buffet had affirmed his earlier confidence on the current mode of recovery of the country’s housing markets in an interview with Bloomberg television.

Mr. Buffet tells Bloomberg’s Betty Liu in an interview at Allen & Co. media conference in Sun Valley, Idaho that the U.S. property market is starting to recover and the improvement seen this year is even better than what has been recorded in the previous year.

He notes, however, that the recovery is not all the same in different states and there are those ahead; nonetheless, this has encouraged them at Berkshire Hathaway to move noticeably within the U.S. property industry.

Earlier reports from Global Property Guide and Global Edge hinted of Berkshire’s recent moves in the property sector with its bidding for the mortgage and loan business of Residential Capital LLC.

Mr Buffet lauds Berkshire’s affiliate, Wells Fargo, in its participation in providing the housing market a boost while navigating through the crises with a 33.9% share of all U.S. home loans in the first quarter as against the 10.6% recorded by JP Morgan, according to trade publication Inside Mortgage Finance.

“Wells did the best job of the big players in the mortgage market and therefore they’ve garnered a share as the other fellows have fallen by the wayside,” says Mr. Buffett, 81, whose firm according to Bloomberg holds more than 7% of the common stock in Wells Fargo.

Reports have indicated that Well Fargo completed $131-billion worth of originations and received $208 billion in mortgage applications in the second quarter. By the end of June, Wells had $102 billion in unclosed loans in the pipeline.

Sources: Bloomberg, Inside Mortgage Finance