Swire Properties has teamed up with Hong Kong property fund Gateway Capital to buy a multi-purpose project in Beijing's Sanlitun district - the capital's diplomatic quarter and entertainment area - for more than four billion yuan, a source said.
Swire Properties, a unit of Hong Kong-listed Swire Pacific, would take an 80 per cent stake in the project while Gateway would own the remainder, sources said.
The project will feature shops, offices and a boutique hotel.
Gateway, which has set up a US$300 million fund for investors from the United States, Europe and the Middle East to invest in property in Greater China, usually takes a majority stake when acquiring projects.
Such a strategy was due in part to the central government's restrictions on foreign funds investing in the property market.
Since June last year, the State Administration of Foreign Exchange has tightened its approval of large-scale property transactions amid mounting criticism that foreign capital is the culprit behind overheating in the property market that the government is struggling to contain.
The sources said Beijing's attempt to restrict foreign investment and its measures to cool the property sector had raised concern among investors from the US and Europe. 'However, the foreign investors remain positive about the market outlook,' a source said.
Gateway originally wanted to buy the northern part of the project on its own for about two billion yuan but brought in Swire Properties so they could buy the entire project.
The involvement of a reputable developer such as Swire Properties would show the joint venture's long-term commitment to the mainland property market, analysts said.
Swire Properties and Gateway on Thursday signed an agreement with the current local developer to acquire the property for 'slightly more than four billion yuan', the source said.
The project would be handed over to them when completed, he said without giving a timetable.
Swire Properties will manage the property's one million square foot retail complex and the 100-room boutique hotel.
A spokeswoman at Swire Properties refused to comment on the deal, saying only that the developer had set up offices in Beijing, Shanghai and Guangzhou.
'We are also looking at opportunities in second-tier [mainland] cities,' she said.
Swire Properties, a major landlord in Hong Kong, has been expanding in the mainland to tap the country's growing property value.
The purchase of the Sanlitun property comes less than three months after Swire Properties formed a 50-50 joint venture with HKR International that would build a HK$10 billion retail-office-residential complex on Nanjing Road in Shanghai.