Greenland sells management arm to rival developer for US$146m

The two developers will strengthen property management co-operation after the sale. Greenland will offer up to 10 million sq m of properties for Agile to manage

PUBLISHED : Monday, 03 July, 2017, 5:42pm
UPDATED : Monday, 03 July, 2017, 9:57pm

Shanghai-based Greenland Holdings, the mainland’s fourth-largest developer by sales, has agreed to sell its property management unit to its Guangdong rival Agile Property Holdings, raking in a one-time gain of 993 million yuan (US$146 million).

After the transaction, the two developers agree to strengthen their tie-up in the property management business in a fast-growing market that is likely to hit 1.2 trillion yuan in five years.

Greenland said in a filing to the Shanghai Stock Exchange that Agile would buy out Shanghai Greenland Property Service with 1 billion yuan, or 350 times its earnings in 2016.

Greenland Property Service which currently manages properties covering a total 4.17 million square metres, reported net profits of 2.86 million yuan in 2016.

Its net assets are valued at 6.5 million yuan.

Greenland agreed to offer up to 10 million sq m of properties to be managed by Agile between 2018 and 2022 following the deal.

The asset sale is subject to an approval by Greenland’s board.

If it were to complete, it would “have a positive impact on the company’s operating performance,” Greenland said in the filing.

The Shanghai-based developer has been accelerating diversifications into commerce and finance as a way of cutting its reliance on property development.

In the first quarter of this year, Greenland Holdings posted a 19 per cent profit rise buoyed by rapid growths in its commercial and financial segments.

Greenland quarterly profit jumps 19 per cent to 2.7b yuan, as non property contributes half of sales

Despite the divestment of the property service subsidiary, Greenland said it would fully support Agile in expanding its property management business, while considering investment in the business via equity financing in the future.

Ageing population, people’s increasing demand for better life and rising awareness about environment protection have become the key driving forces for China’s property management industry.

Property research organisation China Index Academy predicted that the property management market on the mainland could amount to 1.2 trillion yuan a year.

“Property management is now a promising industry to which major developers and powerful institutional investors are keeping a close attention,” said Cao Hua, a partner at Unity Asset Management.

Property management is now a promising industry to which major developers and powerful institutional investors are keeping a close attention
Cao Hua, Unity Asset Management

“With a huge base of property under management, companies can also think about offering other value-added services to clients, such as financing, delivery and shopping.”

Last month, Fitch Ratings downgraded long-term foreign- and local-currency credit rating of Greenland Holding to BB, from BB+, driven by the developer’s persistent high leverage.

In 2016, Greenland reported its profits rose 5 per cent from a year earlier to 7.2 billion yuan.

Sales climbed 19 per cent to 247.2 billion yuan.