Greenland Group may be a top contender in the China market, but the mainland heavyweight seems to be taking a few body shots on its overseas projects.
Just last Thursday the Shanghai-based firm’s US partner revealed a potential $1 billion loss on its Pacific Park joint venture with Greenland in New York. And during that same week, the company’s signature project in London became a fixation with the UK press, which likened the design of “The Spire” to some mission critical male kit.
The Shanghai government-owned developer wowed the world starting in 2014 as it rushed into more than a dozen projects across eight foreign cities over the next two years.
Among the highest profile of Greenland’s overseas projects is its joint venture with American real estate developer Bruce Ratner’s Forest City on the $5 billion Pacific Park complex. Formerly known as Atlantic Yards, Greenland chairman Zhang Yuliang grabbed a 70 percent stake in the development as the company’s second foray into the US market in 2014, but things have slid steadily downhill since then.
On Thursday, Forest City Realty Trust’s CEO David LaRue revealed construction of the remaining Pacific Park buildings would be delayed due to a weakening residential market and high construction costs, among other issues. In announcing Forest City’s financials for the most recent quarter, LaRue said that the REIT was declaring an impairment of non-depreciable real estate of $307.6 million primarily related to Pacific Park. With Forest City holding a 30 percent stake, if applied to the total project, the impairment suffered by the joint venture would translate to more than $1 billion, with Greenland potentially needing to write off $700 million on its New York trophy.
The impairment on Pacific Park comes six months after Greenland and Forest City were reportedly shopping a “very significant” equity stake in the Brooklyn project located near the Barclays Center.
Spire’s Not So Modest Design
While still in the planning stages, Greenland’s £800 million ($996.9 million) The Spire project in London has already raised some eyebrows since it was officially launched in September. The location of what will be Western Europe’s tallest residential building, Canary Wharf, is already suffering from extensive oversupply.
And that doesn’t even factor in the impact Brexit and increased stamp duty on foreign buyers may have on sales at the 67-storey tower.
“In light of the plethora of tax hits over the last few years, possibly exacerbated by the uncertainty of Brexit, it appears foreign investors, the majority buyer of new developments, may finally be turning away,” Naomi Heaton, chief executive at London Central Portfolio, a locally-based fund manager, told the International Business Times earlier this year.
And that’s just the start of The Spire’s problems.
When Greenland, China’s leading real estate developer on the Fortune 500, tabbed architecture firm HOK to transform the former warehouse site into something memorable, they were hoping the masterminds behind the Dubai Marina and 535 Mission Street in San Francisco would come up with a design that would give London’s skyline another icon.
However, HOK’s work has elicited more laughs than applause. The design, which is said to be inspired by the prow and bow of a ship, has been seen in some circles as less iconic and more phallic with everyone from Cosmopolitan to the Daily Telegraph noting that from the air, the building does bear a certain resemblance to male anatomy.
Greenland Stumbles on Three Continents
Earlier this year in the land down under, the Shanghai-based developer ran into trouble with local authorities for failing to clean up a contaminated development site before proceeding with plans for a 244-unit apartment block.
Land at the site, which once housed a pantyhose factory, was deemed to be contaminated with a range of contaminants including chlorinated solvents. Unfortunately for Greenland, they could not claim ignorance on the matter having told the New South Wales Environment Protection Authority they would voluntarily clean up the site.
“The EPA approved the plan on the basis that Greenland would carry it out, however, Greenland have failed to carry out the terms of the proposal,” EPA Manager for Contaminated Sites Niall Johnston told the Australian Financial Review at the time.
Despite the setback, a Greenland spokesperson explained they had a new remediation plan in place and remained on track with construction despite the EPA order.