A rendering of the proposed renovation of the Crest Hotel
China’s love affair with Sydney continued to pick up pace this month as Greenland Group picked up a pair of projects in Australia’s largest city for a combined A$170 million ($131 million).
The Shanghai-based developer, which outsold all other Chinese real estate companies in 2014, is also leading the charge into Australia, by adding these two residential deals to several other projects that it has underway in Australia’s largest cities.
The decision by Greenland to pour more resources into Sydney, a city where it already has two major projects in the pipeline, is taken by some analysts as an affirmation that for China’s largest developers, global gateway cities remain the preferred investment targets, even if rising capital values may drive them into fringe locations in search of return.
Converting Fringe Locations into High End Condos
Greenland’s two latest Sydney acquisitions are the Crest Hotel and an attached bar in the King’s Cross nightlife district of Sydney; and the Crown Hotel, a pub in the western suburb of Parramatta.
The Shanghai state-owned firm bought both sites from local Australian investor, Iris Capital, with the intention of converting both properties into apartments, according to an article in the Australian Financial Review.
The King’s Cross location, which is currently leased out as a Mercure hotel, already has plans drawn up and submitted for approval for conversion into a $42 million, 139-unit apartment block with views of Sydney Harbour. Current plans for units in the building are said to specify prices starting at $616,000.
The Crown Hotel in Parramatta has a similar proposal submitted to authorities for a 200 unit development.
By taking on the Crest Hotel project in what has previously been one of Sydney’s most notorious red light districts, and the Crown Hotel site in an up and coming suburb, Greenland is showing a willingness to move beyond the more clearly core locations of its earlier Australian projects.
The Crest hotel is a few steps removed from the core locations that Greenland bought in the past.
Greenland’s first site in Sydney has now been developed into the $540 million Greenland Tower in the core of the city’s downtown. Seen as one of Sydney’s superprime housing plays, Greenland Tower has already achieved strong sales on the 478 units being built there. In North Sydney, the Shanghai developer has a $154 million 211 unit project underway, also in an upper-end location
In addition to its Sydney sites, Greenland also has two developments underway in central Melbourne, that will yield another 1000 apartments.
Gateway Cities Keeping Their Cachet
Greenland’s enthusiasm for Australia’s gateway cities seems to be shared by a number of Chinese developers, including Dalian Wanda and Country Garden, although rising capital values and a scarcity of sites are pushing some developers into the suburbs or secondary locations.
A drop in Australia’s currency versus the Chinese renminbi, and growing enthusiasm for Australian housing among wealthy Chinese has helped fuel a surge in Chinese acquisitions in Sydney in the last year.
Since October 2014, Chinese companies such as Dalian Wanda, Poly Real Estate and Shimao Property all picked up projects in the Australian port city, totalling more than $1.23 billion in investment. This competition for assets is already making core locations more difficult to secure, and compressing investment yields.
Whether or not these deals produce good returns for developers such as Greenland, they are no doubt welcomed by Aussie investors. Iris Capital, which only purchased the Crest Hotel for $50 million in 2012, more than doubled its money in selling the project to Greenland this month.
In addition to its Australian deals, Greenland, which is set to list on the Shanghai stock exchange this year, also has several billion dollars worth of development projects underway in London, New York, Los Angeles, and Toronto.
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