China Minsheng Buys 80% Stake in SF Bayside Project for Reported $100M

One of China’s largest private investment groups has teamed up with partners in the US to invest in a waterfront development site in San Francisco, joining a growing number of mainland and Hong Kong investors that are betting on the booming Bay Area property market.

A real estate developer controlled by China’s Minsheng Investment Group acquired an 80 percent interest in the fully entitled luxury residential site located two blocks away from the Bay Bridge, for approximately $100 million, according to local media reports.

The deal marks the first North American investment for China Minsheng subsidiary SRE Group, a Hong Kong-listed developer (HKG:1207) focused on first-tier cities in China. SRE acquired the site through a joint venture with a fund controlled by New York-based real estate firm Paramount Group and an affiliate of Chicago-based developer The John Buck Company.

Quenching a Thirst for Premium Housing

Although the price of the transaction was not disclosed, local real estate website The Registry cited sources familiar with the transaction as indicating that the Chinese group agreed to pay $100 million for its stake, while the San Francisco Business Times put the figure at $110 million. The proposed project is located at 75 Howard Street, next to the iconic Embarcadero boulevard along San Francisco Bay. An eight-storey parking garage currently sits on the 20,021 square foot (1,860 square metre) land parcel. The joint venture plans to develop the site into a 21-storey, 120-unit luxury condominium project with a ground-floor restaurant, designed by Skidmore, Owings & Merrill (SOM).

The only entitled development site on the waterfront, the project was narrowly approved by the city’s Board of Appeals amidst some controversy about its design and expected impact on the neighborhood. Global property consulting firm JLL concluded the transaction as the exclusive sales agent, while law firm Paul Hasting served as a legal advisor to SRE Group on the deal.

“The market is bolstered by high entry barriers and a scarcity of available land, which have in turn limited the inventory of prime luxury condominiums,” Flora Wang, national director of JLL’s International Capital Group said of San Francisco’s noted short supply of new homes. Residential pricing in San Francisco has increased dramatically in recent years due to a severe shortage of housing brought on by record-breaking job growth and a steady influx of new, wealthy residents, particularly in the Bay Area.”

The San Francisco Business Times notes that the Bay Area is now undergoing a boom in residential construction that should slake some of the intense demand for housing as thousands of new apartments and condos are delivered in 2017.

Betting on the Bay Area

The deal represents SRE Group’s first foray into US real estate, following its purchase of the central London headquarters of Société Générale for £84.5 million ($112.8 million)  last September. SRE’s parent, China Minsheng, invests in a diverse array of industries from aviation to new energy and senior care, and is reportedly seeking to ramp up overseas acquisitions in 2017.

China Minsheng is just the latest Chinese heavyweight to jump into the Bay Area real estate market. Beijing-based developer Sino-Ocean Land spent $42 million to acquire an office building in San Francisco’s up-and-coming SOMA commercial district less than two miles south of the Embarcadero for $42 million, it was reported earlier this month. Developer China Vanke bought a pair of commercial buildings in the same area in March for an undisclosed sum, with some market analysts predicting that China’s number two home builder will use the projects for a condo development.

China Oceanwide, another developer headquartered in Beijing, bought the two million square foot (186,000 square metre), mixed-use First and Mission project for $296 million in 2015. The supertall project will be located in the South Financial District next to the Embarcadero.