China Still Has a Treasure Chest of Overseas Real Estate to Sell
(Bloomberg) — China’s biggest-ever overseas property buying spree reversed course in dramatic fashion in 2018. But even after the record unwinding, many lucrative real estate assets remain in Chinese hands.
They include the 245 Park Ave. skyscraper in Manhattan, New York’s famed Waldorf Astoria Hotel and Chicago’s Vista Tower, under construction but envisaged as one of the city’s tallest buildings.
With economic growth slowing, keeping a tight rein on capital outflows is expected to remain a key theme for Beijing. That could see disposal records smashed again in 2019.
Beijing put an end to the party in mid-2017, telling the nation’s four largest private conglomerates — HNA Group Co Ltd., Anbang Insurance Group Co. Ltd., Fosun International Ltd. and Dalian Wanda Group — they had borrowed too aggressively.
A forced liquidation was mandated and a “banned list” produced that dumped offshore property and hotels in the restricted basket, and casinos in the don’t-even-think-about-it one.
Still, it wasn’t until the end of that year the spending tapered off. In 2016 and 2017 combined, Chinese companies splashed out an unprecedented $89 billion on real estate.
In 2018, the deleveraging drive really started to take effect. Real estate asset sales by Chinese companies have surged to $12.3 billion since January, up from $5.3 billion the year prior, preliminary data compiled by Real Capital Analytics show.
“While capital controls remain in place, China won’t be the main driver of Asian outbound investment,” said Stephanie Yang, CBRE Group Inc.’s senior director of global capital markets. Buyers from places including Singapore and South Korea are already taking the place of Chinese in markets such as the U.S. and Europe, she said.
The asset sales were “driven in part by the government’s push to reign in the most aggressive buyers, but also by a requirement to reduce debt levels,” said Jeffrey Langbaum, a commercial real estate analyst at Bloomberg Intelligence.
HNA was arguably the worst offender on the trophy collection front, amassing stakes in airlines, catering companies, tech distributors, hotels, asset managers and a currency exchange. Wanda got into cinemas — it’s now the world’s largest movie-theater operator — while Fosun, run by Guo Guangchang, a self-styled Chinese Warren Buffett, bought Club Med and a stakes in overseas fashion houses.
Anbang’s unfettered spending, meanwhile, saw authorities seize control of the conglomerate in February and the insurer’s former chairman, Wu Xiaohui, sentenced in May to 18 years in prison after being convicted of fundraising fraud and embezzlement.
HNA has gone some way to making amends, ending 2018 as the No. 1 seller among the four and accounting for five of the 10 biggest property disposals. Even so, affiliate units have been missing loan and bond payments for months, evidence more cash needs to be brought in the door to overcome HNA’s liquidity challenges.
“The deleveraging trend will continue through the first half of next year,” said James Shepherd, the managing director of Greater China research at Cushman & Wakefield Inc. He said Chinese investors had often relied upon local banks to back their buying sprees. With that tap turned off, and refinancing pressures mounting, further assets sales are inevitable.
And there are willing buyers. A consortium including Ping An Real Estate Co. and China Life Insurance Co. sold a 13-story Boston building for $450 million in August, setting a record for an office transaction in the city.
“The ongoing uncertainties of the trade conflict will put pressure on foreign reserves and the value of the yuan, so capital controls will most likely continue in 2019,” Tom Moffat, CBRE’s Hong Kong-based head of capital markets Asia, said. That will mean ongoing “selective disposals from Chinese investors, whether they’re looking to strengthen their balance sheets or realize a decent profit from their early investments.”
Contact editor Yang Ge (email@example.com)
Nov 13 23:24
Nov 13 20:13
Nov 13 19:50
Nov 13 18:27
Nov 13 17:05
Nov 13 17:27
Nov 13 16:05
Nov 13 14:09
Nov 13 13:42
Nov 13 12:06
Nov 13 11:15
Nov 13 10:18
Nov 13 06:12
Nov 13 03:53
Nov 12 17:25
- 1China’s Manufacturing Sector Expands at Fastest Pace in Nearly Three Years, Caixin PMI Shows
- 2China Will Create ‘Space Economic Zone’ by Midcentury: Report
- 3Swiss Telecom CEO Explains Why He’s Sticking With Huawei
- 4China Revamps Undergraduate Studies, Tapping Controversial Talent Program
- 5Alibaba’s Sales Surge 40% and Profit Triples
- 1Power To The People: Pintec Serves A Booming Consumer Class
- 2Largest hotel group in Europe accepts UnionPay
- 3UnionPay mobile QuickPass debuts in Hong Kong
- 4UnionPay International launches premium catering privilege U Dining Collection
- 5UnionPay International’s U Plan has covered over 1600 stores overseas