Yuzhou Properties Buys Seven Mainland Projects for $591M

Chinese developer Yuzhou Properties said on Monday it would buy seven mainland projects from competitor Coastal Greenland for RMB 3.8 billion ($591 million), according to a filing to the Hong Kong stock exchange.

The portfolio, which spans more than 3.13 million square metres across five cities, is described in a press release as “the major prominent properties projects” of mainland developer Coastal Greenland.

The acquisition helps mid-sized Yuzhou to build up its pipeline of future projects as China’s policy-induced real estate slowdown triggers a wave of consolidation. Larger developers swallowed up their smaller competitors in China at a record rate last year, with mergers and acquisitions in the mainland property sector reaching $44.6 billion in the first half of 2017, up by 78.5 percent compared to the same period of the previous year, according to figures from PwC.

Yuzhou Builds Up Land Bank

Yuzhou, which has traditionally focussed its efforts in the southern part of China, said the deal would allow the Xiamen-based developer to gain its first footholds in Beijing, the southern city of Foshan and the northeast city of Shenyang. It added that the acquisition would help the company to achieve its goal of reaching RMB 100 billion in sales by 2020, and effectively reduce its land costs and secure “considerable” profit margins in the future.

Yuzhou’s contracted sales totalled RMB 21 billion ($3.2 billion) in the first half of 2017, up 67 percent year-on-year. Meanwhile its partner in the project deal, Coastal Greenland, recorded a disappointing interim contracted sales of HK$807 million ($103 million) — down by 67 percent compared to the year before.

Mainland developer Sunac was able to vault from seventh place among the country’s biggest-selling developers in 2016 to fourth place last year, thanks in large part to a debt-fueled series of acquisitions of projects from competing builders.

Xiamen-Based Builder Plants its Flag in Downtown Beijing

Yuzhou’s deal with Coastal Greenland includes full or partial ownership of seven projects, including three premium land parcels in Beijing, Tianjin and Shenyang, as well as four projects on sale in Wuhan, Shenyang and Foshan.

In Beijing, Yuzhou will gain control of a commercial project adjacent to the China World Trade Center in the capital’s downtown Chaoyang district. The company plans to develop high-end offices on the site, which is approved for construction of a gross floor area of 39,200 square metres.

The mainland builder has also ventured into Hong Kong, redeveloping a site it acquired for HK$374 million in 2014 into a 27-storey luxury residential project in the upscale West Mid-Levels area, just uphill from Central district.