US private equity giant Blackstone made the latest acquisition of China real estate assets by a global finance firm this week when it agreed to buy a 40 percent stake in mall developer SZITIC Commercial Property Co, which is now known by the acronym SCP. In addition to the Blackstone acquisition, the investment arm of China’s ICBC bank is also buying 6 percent of SCP.
Blackstone’s move was revealed in an announcement by privately-held SCP, and while the purchase price has not yet been officially disclosed, it is said to be US$400 million. However, Chris Heady, head of Blackstone’s regional real estate business indicated that the retail real estate investment is company’s largest mall investment in Asia to date.
Blackstone Gains a Taste for Chinese Assets
Blackstone is known as the world’s largest alternative investment company and is active in private equity and real estate. The company had already increased its China assets in August by acquiring Hong Kong real estate developer Tysan, and last year purchased the 50,000 sqm Huamin Imperial Building in Shanghai. In April this year, Blackstone’s chief, Stephen A. Schwarzman set up a US$300 million scholarship fund at Beijing’s Tsinghua University.
Shenzhen-based SCP currently manages 19 shopping malls across China under the Incity, SCP Plaza and One City brands covering more than 4 million square metres of space. Before taking on the investment from Blackstone, SCP already had partnered with Carlyle Group, Morgan Stanley and China Resources Vanguard on various projects.
In May of this year SCP secured investment from Carlyle Group to acquire 49 percent stakes in SCP’s Suzhou and Hangzhou Incity malls.
Speaking to the media in Hong Kong on Monday Heady commented, “SCP is a fantastic collection of real estate assets and a very well-respected company. The retail space in China is one where we believe there is going to be significant growth over the medium-to long-term as the country repositions itself to be more dependent on domestic consumption growth.”
Global Private Equity Flooding into China
Blackstone’s purchase of SCP is the latest acquisition for the firm’s $4 billion Asia real estate fund, which is one of many funds hunting for high investment returns in China’s property market.
Gaw Capital of Hong Kong last week announced a final close on its own $1 billion China real estate fund, and KKR closed its own $6 billion Asia fund in July of this year.
ICBC Jumps In
ICBC International Holdings the investment arm of China’s Industrial and Commercial Banking Corporation – China’s largest bank, has also decided to take up a six percent stake in SCP, according to statement from SCP.
A Private Mall Developer with Government Connections
Although SCP is ostensibly a private company, it was found in 2003 with investment from the Shenzhen city government. The company’s formal name SZITIC Commercial Property Co mirrors the names of better known quasi-governmental investment companies, CITIC and GITIC, respectively the China and Guangzhou International Trade and Investment Corporations, although Shenzhen government officially divested from SCP some years ago.