China Vanke dives into US market with major deal

Chinese developer joins rush of property firms expanding offshore by taking major stake in upmarket residential complex in San Francisco

PUBLISHED : Tuesday, 19 February, 2013, 12:00am
UPDATED : Tuesday, 19 February, 2013, 5:21am

China Vanke, the largest listed developer on the mainland, is jumping on the overseas expansion bandwagon by acquiring a majority stake in a high-end residential project in San Francisco.

The deal was unveiled by chairman Wang Shi on his microblog last week.

Vanke bought 70 per cent of the upmarket project at 201 Folsom Street from Tishman Speyer Properties, according to Credit Suisse analyst Du Jinsong.

The development will consist of 669 residential units, according to Credit Suisse.

The move came after Vanke teamed up with New World Development last month to win a residential site in Tsuen Wan for HK$3.43 billon.

If we believe in the economic cycle, now could be a good time for Chinese developers to do pilot projects in untapped international waters

"Although China is an immense market which could accommodate further growth, it will inevitably become more competitive going forward. Expansion into overseas markets is a natural solution to this," Mizuho Securities Asia analyst Alan Jin said.

Jin expected more mainland developers to expand overseas.

With the mainland authorities forbidding residents from buying more than two homes, a growing number of cashed-up investors are turning to overseas property. "That's certainly an important reason and a common one among Chinese developers aiming for overseas expansion," Jin said.

For example, Country Garden plans to sell some flats in Malaysia to mainland buyers while Vantone Real Estate's first residential project in Taiwan will also cater for the mainland market.

"If we believe in the economic cycle, now could be a good time for Chinese developers to do pilot projects in untapped international waters," Jin said. "In some of the developed economies, housing markets are starting to regain life but prices are not excessive yet."

He said such projects would be small but the main purpose at this stage was to gain experience rather than profits.

BNP Paribas research head Lee Wee Liat said growing numbers of Chinese would live overseas as China became more internationalised.

"China Vanke is positioning itself for an emerging big trend six to eight years down the road," Lee said.

According to mainland media, 12 developers have expanded overseas. Greenland Group said last year it would speed up its plan to build a residential-commercial-hotel project in Sydney at a cost of 8 billion yuan (HK$9.9 billion).

A spokesman from Vanke said officials were unavailable for comment yesterday.

Shares of China Vanke subsidiary Vanke Property (Overseas) yesterday rose 6.46 per cent to close at HK$16.80.