Yanlord, GIC Launch RMB 7B China Residential JV as Market Rebounds

SGX-listed Yanlord Land Group Limited said Tuesday it has partnered with Singapore’s sovereign wealth fund GIC to jointly develop integrated commercial and residential property projects in high-growth cities across China amid signs the mainland residential market is gradually recovering from the impact of the Covid-19 outbreak.

The joint venture will be owned 51 percent by Yanlord’s wholly owned subsidiary Yanlord (China) Investment Group Co. and 49 percent by an affiliate of GIC, the partners said in a statement. The companies had been working together in the past decade, announcing their first joint venture in 2006 to pursue residential projects in Nanjing, Shanghai and other Chinese cities.

The latest partnership, which aims to invest up to RMB 7 billion ($1 billion) in high-end residential projects in China, comes as government data showed housing sales rebounded in the second quarter, as major urban centers emerged from a nationwide lockdown designed to curb the further spread of coronavirus.

Green Shoots of Recovery

Property sales by floor area rose 2.1 percent year-on-year in June after climbing 9.7 percent year-on-year in May, according to Reuters. While sales slowed in June, growing demand from homebuyers is adding to the green shoots of recovery in China, with Yanlord’s recent results reflecting the recovery in housing demand in the mainland’s top cities.

Contracted pre-sales for the company across China reached RMB 29.8 billion in the first half of 2020 — up 65 percent compared to the year before, Yanlord reported in early July. About 84 percent of the developer’s sales came from projects in five cities, namely Hangzhou, Nanjing, Suzhou, Shenzhen and Tianjin.

With contracted sales recorded in the first half, Yanlord said in a statement to Mingtiandi that the company is maintaining its full-year 2020 sales target of RMB 70 billion as declared earlier.

Yanlord plans to launch new residential projects in Shanghai and Hangzhou this month, in line with its focus on China’s Yangtze River Delta and other key mainland economic hubs.

While Yanlord and GIC did not elaborate on their investment plans, the partners said the investment agreement will run for seven years, with an option to extend for another two years. Yanlord said the joint venture is still on the lookout for new potential residential sites.

“Since 2006, GIC and Yanlord have co-operated to invest in Nanjing and expanded our footprint in key cities in China,” said Zhong Sheng Jian, chairman and CEO of Yanlord. “The cooperation program will further strengthen our presence in China and create value to the shareholders.”

Bullish on China’s Prospects

Nanjing, the capital of the eastern Chinese province of Jiangsu, is among the most resilient property markets in China. The city, located 300 kilometers away from Shanghai, accounted for about 27 percent of Yanlord’s contracted pre-sales in the first half.

While GIC says it’s cautious of the global investment climate after its real annualised returns dropped to 2.7 percent in the year ended March 2020, down from 3.7 percent the previous year, the asset manager remains bullish on China’s prospects.

In a report published late last month, GIC voiced its faith in the benefits that urbanisation, a growing middle class, improving infrastructure and deeper integration would have for Asian economies, including mainland China, despite friction with the US and the impact of the coronavirus.

“While headline risks have indeed risen, these factors should continue to generate self-sustaining growth in Asia, including China, and drive its outperformance over the long term,” the sovereign wealth fund said in its most recent publication.

GIC reportedly partnered with global real estate fund manager AEW to buy an office building near Beijing’s Financial Street for just under RMB 3 billion. That deal in Xicheng district came less than six months after GIC’s RMB 8.8 billion purchase of the LG Twin Towers in the Chinese capital’s Guomao area in February, just as the Covid-19 pandemic began to spread around the world.

Yanlord Expands in China, Singapore

Yanlord’s Zhong started his real estate business in the early 1990s with the establishment of offices in Nanjing and Shanghai, and has since grown the company into one of the biggest non-government owned property developers in China. A native of mainland China, Zhong moved to Singapore in 1988.

Listed on the Singapore Exchange in 2006, Yanlord has focused primarily on real estate projects in China. However, in recent years it has also been making inroads in the Southeast Asian financial hub.

In October 2019, it offered to buy out other shareholders of United Engineers, valuing the century-old property Singapore-based company at S$1.7 billion ($1.24 billion).

In 2018, Yanlord teamed up with Hong Kong Land’s Singapore-based affiliate MCL Land to snap up a prime en bloc site in the city-state for S$906.9 million.