While China’s real estate market slump has meant trouble for some investors, many companies continue to see it as an opportunity to shop for deals that might never be available in a bull market.
Tianjin-based developer Sunac is taking advantage of the current slowdown to buy up shares in Hong Kong-listed Greentown China Holdings, whose owners have decided that now is a good time to lower their exposure to their own company.
According to a report in the Wall Street Journal, Greentown Chairman Song Weiping and some of his close associates have agreed to sell up to 30 percent of their 43 percent stake in the company to Sunac. The value of the sale would depend on the final share price and timing, but the Journal quoted a Deutsche Bank estimate of the final price tag reaching HK$7 billion (US$903 million).
Sunac and Greentown Already Well Acquainted
The two developers have a recent history of working together, having established partnerships on a number of recent projects.
In June last year the two Hong Kong-listed companies confirmed the acquisition of Dynasty-on-the-Bund, a mixed-use project in Shanghai’s Huangpu district for RMB 5.68 billion.
In September last year, Sunac and Greentown paid RMB 507.4 million to buy a 49 percent share of a mixed-use project in Shanghai’s Putuo District, and in March this year a joint venture between the two companies paid RMB 2.4 billion to acquire a 66,000 square metre plot in the city’s Baoshan District.
Sunac’s aggressive purchases last year, which included setting a new record for Shanghai land buys, earned it the title of a “land king” in the local real estate community.
Developer Becoming a Downturn Expert
Greentown, which is based in Hangzhou – a city which has encountered some of the most widely chronicled troubles during the current market slide, has a history of economic ups and downs. During the 2011-2012 downturn the company nearly went broke before a sale of assets to SOHO and sales of equity to Hong Kong developer Wharf helped to bail it out of immediate difficulty.
Greentown also went to the international financing markets earlier this year to raise cash through a bond sale.
Greentown’s Home Market Central to Current Slide
While no direct motivation was cited for the share sale by Greentown’s owners, the company’s website, which boasts of its focus on eastern China’s Zhejiang province, may offer some clues.
“Since its establishment 19 years ago, the Group has been based in Zhejiang Province, one of the most economically vibrant provinces in the PRC. With property projects covering most of the economically prosperous cities in Zhejiang Province such as Hangzhou, Ningbo, Wenzhou, Taizhou, Shaoxing and other cities…”
Besides Hangzhou becoming a centre for home discounting, Ningbo was home-base for Zhejiang Xingrun Real Estate, the collapse of which signalled the first round of what is shaping up as a potential credit crisis. Wenzhou, which was formerly famous for its real estate speculators, has seen its housing market decline for more than two years and disturbances related to home sales discounts brought out the SWAT team in Taizhou this year.