Greentown chairman Song Weiping backed out of a merger with Sunac in 2014
After teetering on the edge of bankruptcy in 2014, real estate developer Greentown China has bounced back. Just two years after nearly selling itself to pay off creditors, the once insolvent home builder this week announced a RMB 20 billion ($2.9 billion) outbound investment program that would transform the Hangzhou-based company into a multi-continent concern.
Greentown plans to invest in 10 development projects in Australia, the US, and southeast Asia between now and 2020, according to a statement this week on the company’s website. The cross-border deals, which the company says might also include the UK, Japan, Canada, Malaysia and Sri Lanka would be the first overseas adventures for the upmarket mainland homebuilder.
Leveraging Parent Company and Customer Base in Overseas Drive
In the statement, Greentown CEO Cao Zhounan said that the company would leverage two key sets of relationships in its overseas drive – the connection between the developer and its largest shareholder, China Communications Construction Corp (CCCC), and the company’s large base of high net worth customers.
CCCC, which bought more than 28 percent of Greentown’s equity in 2014 and 2015, has already been expanding globally as both a developer and infrastructure builder by leveraging its close ties with the government. The state-owned builder late last year completed a $950 million joint venture deal with US developer Related for a Los Angeles project, and also has North American projects in Miami and Mexico. In the announcement, Greentown included Los Angeles among its target cities for investment, and added San Francisco for good measure.
In Asia, CCCC is developing projects in Malaysia, Indonesia and Sri Lanka. In Australia, the Beijing-based firm is active in infrastructure and development through John Holland, a Aussie builder it acquired in 2014.
Despite recent moves by the Chinese government to clamp down on capital outflows, Greentown pointed to the company’s customer base as a key element supporting its overseas expansion. Greentown’s expansion could help these high net worth individuals to buy homes overseas, as well as helping their children to gain access to overseas education and other opportunities, the company said in its statement.
Major Rebound for Greentown
The overseas expansion drive represents a significant rebound for Greentown which nearly became a victim of China’s 2014 real estate slowdown after betting heavily on the Zhejiang luxury market.
In November of that year, Chairman Song Weiping pulled out of an agreement to sell the developer to rival Sunac China after the two companies had already begun implementing a merger. The developer was saved from absorption into Sunac by government policies to revive the property market. CCCC invested $775 million in Greentown in December 2014.
During 2016 Song’s company sold a record RMB 113.6 billion in real estate to rank as China’s ninth largest developer.
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