Greenland to Go Public as Government Picks Real Estate Winners

Greenland Group, which has gained fame as China’s most aggressive outbound investor, plans to go public this year through a backdoor listing on the Shanghai stock exchange, according to a statement released on Monday.

The public listing of the government developer comes as many smaller real estate firms find credit cut off, and indicates potential government interest in picking winners in the midst of a consolidating market.

Shanghai Jinfeng Investment announced an asset swap with Greenland under which the developer will inject RMB 65.5 billion (US$10.60 billion) of assets into the listed firm, in exchange for 11.3 billion new shares of Jinfeng at RMB 5.58 per share.

Once the asset swap is complete, Greenland will own 100% of Jinfeng, and the deal has been reported in the local media since July of last year. In a separate deal last year, Greenland purchased a 60 percent stake in Hong Kong-listed SPG Land Holdings for HK$3 billion, providing the developer with an offshore vehicle for fundraising.

Timing Shows Government Hand in Market Consolidation

Greenland’s listing in Shanghai will make the state-run enterprise the first property developer to go public on a mainland exchange since the government suspended approvals for such moves in 2010.

This move to provide Greenland with greater access to funding through the stock market comes just two weeks after another of the country’s leading developers, China Vanke, received permission to transfer its listing from the less traded Shenzhen exchange to Hong Kong’s more global and potentially more lucrative, stock market.

The timing for these two listings coincides neatly with a general credit clampdown that has sent developers scrambling for funding, and suggests the government is attempting to accelerate market consolidation.

This week, privately owned Zhejiang Xingrun Real Estate collapsed when it was unable to secure further funding for its projects, and the CEO of one medium-sized developer predicted that 20 percent of China’s developers would cease to exist this year in the face of current market pressures.

Move Could Provide Additional Capital for Outbound Investment

For Greenland, the public listing could provide further funding for the expansionary dreams of one of China’s most aggressive overseas developers.

Last week the Shanghai-based company made known a $360 million deal for a development project in Toronto, which is just the latest in a string of overseas ventures. The Canadian deal means that Greenland now has projects underway in seven countries, including two billion dollar deals in the US, two London ventures each estimated to be worth more than $900 million, and additional projects in Australia, Malaysia, South Korea, Spain and Thailand.

The majority of these developments have been announced in the last 12 months, and all of them within the last two years. The move to go public could provide Greenland with an important funding vehicle for achieving progress on its flock of overseas projects, and also allow the company to make further acquisitions.