China’s outbound investment wave continued to flow into Sydney as buyers from the mainland and Hong Kong acquired more than $1.23 billion worth of major assets during the last two months of 2014.
Most of the investors were major mainland property developers looking to escape the dwindling returns of a slumping Chinese property market. Companies such as Dalian Wanda, Poly Real Estate and Shimao Property all picked up projects in the Australian port city, hoping that their existing clients on the mainland will be keen to buy Sydney apartments, and local consumers will learn to love these Chinese real estate brands.
While 2014 was a record year for Chinese investment in the Australian property market, with acquisition values more than doubling over 2013, bigger things could be on the way for 2015 in Sydney and other parts of Australia, with several more Chinese developers predicted to acquire Aussies real estate assets in the coming months.
Wanda Buys Harbourside Tower After IPO
One of the biggest deals of the quarter happened just a few days before Christmas when Dalian Wanda, the property group controlled by Chinese billionaire Wang Jianlin, bought Gold Fields House, at 1 Alfred Street, Circular Quay in Sydney for A$425 million (US$344 million).
Wanda is said to have acquired the 25-storey office tower with the intent of converting the building for residential use. Current owner Blackstone in 2012 gained approval to repurpose the tower overlooking Sydney Harbour into 197 luxury apartments.
The sale was made known on 21 December, just days after Wanda sold out its Hong Kong IPO for $3.7 billion. Wanda’s acquisition was only the second biggest Chinese property deal of the quarter in Sydney, however, after state-owned Sunshine Insurance bought the Sheraton on the Park hotel for $375 million on November 21st.
Chinese Investment in Australian Commercial Real Estate Doubled in 2014
The surge of Sydney deals in the last two months was part of a record 2014 for Chinese investment in the Australian market in general, with acquisitions from Chinese buyers doubling compared to the previous year.
|Property||Value (US$M)||Date Announced||Investor||Current Prop Type||Planned Prop Type|
|233 Castlereagh Street||102||2014-11-07||Vision Investment Group||Office||Residential|
|175 Liverpool Street||324||2014-11-13||Shimao/Hui Wing Mao||Office||Residential|
|Sheraton on the Park||375||2014-11-21||Sunshine Insurance Group||Hotel||Hotel|
|Cambridge Office Park||89||2014-12-04||Poly Real Estate Group||Business park||Residential|
|Gold Fields House||344||2014-12-21||Dalian Wanda||Office||Residential|
According to research by property consultancy DTZ, mainland and Hong Kong investors pumped $9.85 billion into buying Australian office, retail, industrial and mixed-use assets last year, compared to $5.57 billion in 2013.
Chinese developers, such as Country Garden, Guangzhou R&F Properties and Greenland Group also purchased a large number of residential development projects.
4 Chinese Developers Buy Sydney Real Estate in 2 Months
While Wanda’s deal was the biggest of any Chinese developer in November and December, the Beijing-based property firm only jumped in after three of its competitors had already picked up Sydney real estate since November 1st.
Vision Investment Group, an Australian company owned by a mainlander, started out the buying spree by acquiring an office block at 233 Castlereagh Street in Sydney for $102 million in a deal made public on November 7th. Another Australian passport holder joined in less than a week later when mainland-born billionaire Hui Wing Mao, together with his Hong Kong-listed development firm Shimao Property, bought an office block at 175 Liverpool Street in the port city for $324 million.
Top-three China developer Poly Real Estate waited until December to buy a suburban Sydney office park from Goodman Group for $89 million.
Converting Offices into Apartments
Although all four of these Chinese developers acquired office assets, they also all appear to have the intent of converting these existing buildings for sale as apartments.
Wanda’s Gold Fields House had already been approved for conversion before the acquisition, and Shimao is said to have similar plans for its tower along Sydney’s Hyde Park.
According to an article in Sydney newspaper, The Australian, Vision Investment Group’s site at 233 Castlereagh Street has also long been pegged as future residential space, and Poly’s suburban site has been zoned for 500 apartments plus commercial space.
In developing residential space in Sydney, these four Chinese real estate firms may be following the lead of Shanghai-based Greenland Group which has already acquired four sites in Australia’s commercial centre.
After acquiring its first Sydney project in March 2013, the state-owned developer was able to quickly boost its sales, adding vital new revenues to its bottom line. In the case of that first Sydney project, the demand for Aussie apartments among Greenland’s Chinese clientele was so high that buyers snapped up RMB1.5 billion (US$246 million) of the downtown Sydney high rise homes on the first weekend of sales.
Fosun, Gemdale and Others Said to Have Deals on the Way
This ability to sell Australian property to mainland buyers is projected to continue to drive new acquisitions in Sydney and other parts of Australia during 2015.
According to an account in The Australian, Fosun International, the investment conglomerate led by billionaire Guo Guangchang is set to acquire an eleven-storey office block at 73 Miller Street in Sydney from Morgan Stanley subsidiary, Investa, within the coming weeks.
Vision Investment Group is also said to be preparing to acquire another office building, this time at 338 Pitt Street in Sydney, for $84 million. This asset is also said to be slated for conversion into office space.
Other Chinese investors said to have plans to acquire Australian real estate in the new year include China Merchants Property of Shenzhen, and Shanghai-based Jiangsu Future Land Development. State-backed Gemdale Group, which recently fortified its balance sheet with $235 million of fresh capital through a private share offering, is also said to be on the hunt for assets down under.