Swire in talks on hotel-office project
Firm may partner with US fund Gateway Capital on 4b yuan Beijing development
Swire Properties was in talks with United States property fund Gateway Capital to take part in a retail-hotel-office development in Beijing's Sanlitun district worth almost four billion yuan, sources said.
Gateway originally planned to acquire only the northern portion of the site for a development worth about two billion yuan but with the addition of Swire decided to expand its plans.
'Now, they want to take the whole site,' the sources said. 'The two parties are conducting due diligence.'
Swire will be responsible for developing and managing the project given its track record building and operating luxury hotels, grade A office blocks and high-end residential developments, mostly in Hong Kong.
In 2004, then managing director Keith Kerr, who is now chairman of Swire Properties, said the company was looking for development opportunities in key cities such as Shanghai and Beijing while keeping large, second-tier coastal cities on the shopping list.
Swire Properties' only mainland project, a four billion yuan office-retail-hotel project called Taikoo Hui in Guangzhou, is slated for completion in 2008.
The developer currently had a relatively modest 900,000 square foot land bank on the mainland that would soon be exhausted, said sources familiar with the deal.
Swire's portfolio of property suitable for development has dwindled to the point where the recent recovery in the Hong Kong residential market will be of little benefit to the company, according to a report from Morgan Stanley.
Both Swire and Gateway were unavailable for comment.
Like many other cash-rich foreign developers, Swire hopes to take advantage of the woes afflicting many mainland property developers that are suffering from government efforts to rein in the market by making credit more expensive and harder to come by.
Those efforts also include measures meant to make it both more difficult and less attractive for foreign developers to jump into the market.
Foreign buyers of property not intended for their own use must do so through a wholly foreign-owned mainland company or a joint venture with a mainland firm.
They are also required to take a minimum 50 per cent equity stake in any project worth more than US$10 million.
Richard van den Berg, managing director and country manager for China at ING Real Estate Investment Management (Asia), said the net effect of the government measures was to encourage longer-term investment.
'A short term view in China is not going to be very profitable,' Mr van den Berg said. 'If you enter China, especially at this moment, you have to take a mid- to long-term view.'