China’s biggest developer is in talks to buy RMB 12.9 billion ($1.9 billion) in commercial property from an unspecified seller, which appears to be America’s biggest landlord, following a statement today from China Vanke regarding deal discussions.
The property firm controlled by entrepreneur Wang Shi, which last month saw a RMB 45.6 billion ($6.9 billion) deal to trade shares for sites with Shenzhen’s metro operator get rejected by shareholders, has alerted the Hong Kong stock exchange that it has set up a special purpose fund, and is holding talks with Blackstone Group to purchase unspecified commercial properties from the alternative investment giant.
The assets in question are rumored to be part of Blackstone’s portfolio in China. The US investment house paid approximately $400 million to acquire a 40 percent stake in mainland mall developer SCP in 2013, and also invested an estimated RMB2.7 billion ($404 million) to acquire the Huamin Imperial commercial complex (now Garden Square) in Shanghai’s Jing An district in 2012, which it later resold.
Why Blackstone Chief Abstained from Vanke Board Vote
Vanke’s statement to the Hong Kong exchange indicated that the Shenzhen-based developer would contribute an estimated RMB 3.9 billion to the potential transaction, but did not list the names of its partners in the proposed deal, noting only that the co-investors were not related parties. Reports earlier this week in the Hong Kong press indicated that Vanke had lined up a RMB9 billion loan from Shenzhen-based China Merchants Bank to fund the deal.
The company also did not identify Blackstone as the would-be seller, but did acknowledge that there are rumors in the market regarding a potential transaction between the two companies. Vanke also pointed out that, in a July 4th statement to the exchange regarding its restructuring plan, it had disclosed a potential transaction with Blackstone.
Last month when Vanke’s board voted on the purchase of sites from Shenzhen Metro, non-executive director Liping Zhang, whose day-job sees him suiting up as chairman of Blackstone China, excused himself on the grounds that Blackstone and Vanke were negotiating a commercial real estate transaction.
Vanke and Blackstone Already Old Friends
Blackstone has a number of property joint ventures already in China, including with Vanke’s second-largest shareholder, China Resources. Vanke and Blackstone themselves are currently collaborating on a joint venture investment platform to develop logistics facilities in China.
The US investment firm run by Stephen Schwarzman already disposed of a significant chunk of its China real estate holdings to a mainland group this year when it sold a 66 percent stake in Hong Kong-listed Tysan Holdings to HNA Group for HK$2.62 billion ($337 million).
Vanke’s management has been struggling since late last year to escape an apparent hostile takeover bid by its now largest shareholder, Baoneng Group. While Baoneng Group’s proposal last month to fire chairman Wang Shi and the rest of the Vanke board was blocked by China Resources, the investment conglomerate has upped its stake in Vanke since the stock recommenced trading last week, and is said to still be pushing for control of the developer.