Greenland Group Readies $3.24B in Hotels for Singapore REIT Listing

Greenland Group continues to lessen its dependence on its domestic real estate market after China’s second largest developer by sales announced on Friday that it would package up 19 of its mainland hotels into a Singapore-listed REIT.

Once listed, the hospitality properties, which are valued at RMB 21 billion ($3.24 billion), would create what is said to be the largest Chinese REIT to date.

Over the last three years state-owned Greenland Group has been one of China’s most aggressive cross-border real estate investors, pursuing development projects in the US, UK, Malaysia and Japan. Domestically, the company that made its name building housing for eastern China’s middle class has diversified into commercial real estate and Internet finance.

Setting Up a Singaporean Investment Vehicle For Hotel Assets

To facilitate the REIT-listing Greenland is injecting the hotel assets into a special purpose vehicle named Amare Investment Management which was set up by Singapore-based Glory Fund Management Group, according to an account in the Business Times. Glory Fund Management counts among its senior team members Shanghai-based Singaporean investor David HL Su, who will serve as chairman of Amare Investment Management, and former Dalian Wanda Hotel executive Davis Lo.

The potential listing has still not received regulatory approval and Greenland has yet to release details on how much it plans to raise through the REIT or when the listing would take place. The developer said it would retain a 30 percent stake in the listed trust.

The properties in the asset injection include hotels in 10 cities across China, including Shanghai, Nanjing and Yangzhou in Jiangsu province, Jinan in Shandong province, Xi’an in Shaanxi province and Zhengzhou in Henan.

Greenland and its Amare management team said that the Chinese developer could inject more assets into the special purpose vehicle in the future, including some of Greenland’s hotels outside China. The state-owned giant currently has hospitality properties in Los Angeles, Sydney and Frankfurt.

Speaking to the press in Singapore, Greenland and its Amare team also said that they would jointly set up a company to manage the hotel assets, which are currently operated by international firms including InterContinental Hotels Group, Starwood and JW Marriott, according to an account in the Straits Times.

Mainland Firms Go “Asset Light” as Returns Slow

Greenland’s decision to set up the hotel REIT continues the developer’s diversification and mirrors efforts by mainland counterpart Dalian Wanda group to move away from developing real estate in China towards becoming an international investment management firm.

Just last month Greenland’s New York partnership proposed building a 1.5 million square foot (140,000 square metre) office tower near the Pacific Place development in Brooklyn that would be the New York borough’s tallest building.

During the past three years the Shanghai company has taken on new developments in Tokyo, London, New York, Los Angeles, Sydney and Melbourne, among other locations.

As China’s domestic real estate market has slowed, Greenland has already turned to new funding sources such as Internet finance. Last April the company’s Internet finance division successfully raised RMB 200 million ($32 million) in 30 minutes by offering a wealth management product to investors via Alibaba’s Ant Financial service.

Greenland’s new financing push mirrors efforts by Dalian Wanda which raised $805 million online last year through its own Internet finance product. Wanda has recently been relying on private equity and wealth management companies to fund its projects through offerings syndicated to domestic Chinese investors as the company proclaims its new “asset light” business model.

Now state-owned Greenland Group also appears ready to share the risk and reward of its projects through the REIT listing.

While China has experimented with REITs in recent years, it does not yet have a clear path for property firms to raise capital from retail investors through the listed vehicles. With Singapore offering favorable tax conditions for REITs the island nation remains the favored destination in the region for listed real estate trusts.