Aoyuan’s new acquisition comes complete with plans for a new condo tower. (Rendering by Bates Smart).
Australia may be making noise about slowing down sales of homes to foreigners, but the government’s regulatory moves didn’t stop Aoyuan Property Group from becoming the latest Chinese developer to buy a project in Sydney.
The Guangzhou-based real estate firm formed a 70/30 joint venture with Australian developer Ecove to buy a 14-storey office tower in Australia’s biggest city for A$121 million ($94.79 million) according to a story in The Australian today.
Aoyuan’s acquisition is the latest of a flurry of moves by Chinese investors to pick up projects down under as a slowing real estate market in China, and a rapidly depreciating Australian dollar, have enhanced the appeal of Aussie property assets.
Chinese Buyers Help Aussie Fund to Double Its Money
130 Elizabeth Street as it looks now.
Aoyuan’s Sydney office building, which the company acquired from Melbourne-based superannuation fund Cbus Property, is already slated to become a residential project. According to plans submitted by Cbus and given preliminary approval in September of last year, the property alongside Sydney’s Hyde Park at 130 Elizabeth Street will soon give way to a 36-storey block of condominiums.
Cbus’ plans call for 148 apartments and 242 square metres of retail space on the ground floor of the new tower, and design firm Bates Smart won a City of Sydney Design Excellence Competition for its design of the complex just last December.
Cbus itself only acquired the office tower from GE Real Estate in July 2013 for an estimated A$55 million ($43 million), more than doubling its money in just over 18 months.
Buying Offices to Sell Apartments
In buying the Sydney office space for conversion into apartments, Aoyuan is following the same approach as Chinese competitors Shimao Property Holdings and Dalian Wanda have taken with their own projects in Sydney.
Shimao, together with its chairman Hui Wing Mau, bought an office building next to 130 Elizabeth Street last November for over A$390 million (US$305 million). Shimao has said that it too plans to convert its acquisition at 175 Liverpool Street into residential space.
Dalian Wanda bought a total of three office buildings, most notably Gold Fields House in Sydney, and announced in January that it would create a $1 billion condo project on the combined site.
Along with the A$401 million ($314 million) acquisition of Sydney’s Sheraton on the Park last November by Sunshine Insurance, Chinese investors have now purchased three major properties on the borders of the city’s Hyde Park in the last four months.
Currency Shift and China’s Slow Market Drive Investors to Sydney
Aoyuan’s acquisition adds to a list of Chinese investments in Sydney that had already totalled $1.23 billion by the beginning of this year, after Australia’s currency slid more than 12 percent against the Chinese yuan during the second half of 2014.
Developers such as Hong Kong-listed Aoyuan, which is reportedly sitting on a land bank of more than 12 million square metres in China, are also scrambling for new sources of investment yield, as China’s domestic real estate market has suffered through nine months of declining home prices.
With China’s currency still loosely pegged to a soaring US dollar, and analysts at Citigroup predicting last month that the Australian dollar would slide another 10 percent versus the American currency this year, Australian assets should continue to attract attention from mainland investors.
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