Jan. 7, 2014 4:49 a.m. ET
A major Chinese state-owned real-estate developer is putting £1.2 billion ($2 billion) into two London projects, continuing a string of overseas investments in the city's booming property market.
Greenland Holding Group on Tuesday bought the historic Ram Brewery site in southwest London, where plans have been percolating for years to build apartments, restaurants and shops. Greenland, based in Shanghai, didn't disclose the purchase price but said it expects to spend £600 million to buy and develop the space.
Separately, Greenland said it plans to invest another £600 million in a residential tower on the other side of London, in the Canary Wharf financial district. The deal is expected to be completed by the end of January.
Greenland is among several high-profile mainland Chinese property companies that have gone on an overseas shopping spree in the past year, purchasing big real-estate projects in cities such as New York, Los Angeles and Sydney.
"For us, Chinese investment is important," said Edward Lister, London's deputy mayor, at the Tuesday signing ceremony. He said he has made extensive trips to China over the past year, with the aim of encouraging more firms to invest in the city.
Greenland is the third large Chinese developer to invest in London, according to Mr. Lister, who cited Dalian Wanda Group and Reignwood Group.
China isn't alone. Indian developer Lodha Group bought the Canadian high commission building in November, with plans to turn the building into luxury apartments.
In a city starved for housing, foreign investment in large residential projects is coming at a crucial time.
A rising population "means we have to develop big sites like this," Mr. Lister said. The 661 new homes that are planned for the brewery site are "very welcome to London's housing needs," he said.
A lack of supply is helping push up home prices, while stagnating wages are making them even less affordable. The average home price in London jumped 15% in the fourth quarter from the same period in 2012, to £345,186, according to U.K. lender Nationwide. Mr. Lister said 50,000 new homes are needed each year in the city and environs to keep up with demand.
Real-estate consultancy Knight Frank says foreign buyers make up 10% to 15% of all new-building sales in London.
London homes are often viewed as haven investments, benefiting from a sturdy U.K. legal system and the pound.
Chinese buyers, meanwhile, have looked abroad to avoid restrictions on home purchases and a sluggish stock market. The appreciation of the yuan in recent years also has made overseas assets more affordable.
Demand from wealthy foreigners, who often buy into developments before the buildings are completed, is at the root of a growing U.K. political debate. In December, some of biggest U.K. home builders tried to quell any criticism about their ties to foreign investors. The Home Builders Federation, with members including Barratt Developments PLC and Taylor Wimpey PLC, said it would no longer market new homes overseas before promoting them in the U.K.
Zhang Yuliang, Greenland's chairman and president, said at the signing ceremony that signs of economic recovery in the U.K., as well as in the U.S., were helping drive the group's overseas investment decisions. London fits the mold, he said, as the focus remains on cities with "huge potential" for growth.
Greenland said in a statement that it is looking to invest $5 billion to $8 billion in new projects abroad this year, and that it is specifically looking to places like Canada, France and Singapore.
The firm said it expects revenue from its overseas operations to exceed 13 billion yuan ($2.1 billion) this year, and 30 billion yuan next year, up from an expected 2.5 billion yuan in 2013.
Greenland bought the Ram Brewery site—which housed the original brewery of British pub chain Young & Co.'s Brewery YNGA.LN +0.48% PLC, and which once had a ram living in its stables—from a property group backed by Ares Capital Management and Delancey Real Estate Asset Management Ltd.
The 7.75-acre site is being sold with planning permission for the new homes, including a 36-story tower with 166 flats, and 9,500 square meters (102,000 square feet) for businesses.
"Our efforts to date, together with Greenland's world-class development expertise, will mean that this long-awaited scheme finally happens for [the London borough of Wandsworth]," said Paul Goswell, managing director of Delancey.
Greenland, which isn't listed in mainland China but has a unit listed in Hong Kong, said last month that it issued additional shares to five private-equity investors for 11.73 billion yuan, which it will use to fuel its expansion.
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China's Greenland Invests in New York Project
By Francys Vallecillo | October 11, 2013 10:25 AM ET
Chinese property developer Greenland Holdings is planning to invest in a 15-tower New York apartment project, as the company ups its investments in the U.S. property market.
The Shanghai-based developer has signed a memorandum of understanding to purchase a 70 percent stake in the Atlantic Yards Apartment Project in Brooklyn, in what would be the largest commercial real estate development to get backing from a Chinese company, according to the Wall Street Journal.
The joint venture covers "both phase one and phase two of the project -- excluding Barclays Center and the first housing tower, B2 -- including infrastructure, a platform and residential units," Atlantic Yards developer Forest City Ratner said in a statement.
The partnership will allow Forest City to deliver the project "more expeditiously, which is important for Brooklyn and the entire city," Forest City executive chairman Bruce Ratner said in the statement.
Greenland is one of several Chinese development companies increasing their overseas property investments. Greenland announced its plans to ramp up investments out of China earlier this year. The company made its first purchase in the U.S. this summer, when it purchased a $1 billion stake in a Los Angeles project.
"Greenland holds a positive view on the U.S. market," Greenland chairman Zhang Yuliang said in statement. "The U.S. economy is recovering. There's ample amount of liquidity in the market."
The purchase price for the Atlantic Yards project has not been disclosed.
Under terms of the deal, Greenland would purchase the 70 percent stake in the project from Forest City Ratner Cos., which started the project and will continue to manage it, WSJ reports.
"The trend for Chinese developers to continue to invest in the property market abroad will depend on the returns they get in the first batch of such investments," Frank Chen, Shanghai-based head of China research at property broker CBRE Group Inc., told Bloomberg. "The biggest challenge they face is not knowing the foreign markets well, so it's wise to work with local partners."
The project, which is anchored by the Barclays Center arena, is expected to cost approximately $4 billion including debt. Forest City has invested $500 million in the 22-acre development to date. The company has committed to additional spending on land and infrastructure totaling hundreds of millions of dollars, according to WSJ.
The project will include approximately 6 million square feet of residential space with more than 6,400 units, 247,000 square feet of retail space and approximately 336,000 square feet of office space.
Construction for the first 32-story residential tower started at the end of 2012. Half of the 363-unit building will be reserved for low-, moderate- and middle-income residents, Bloomberg reports. The project will also include one office building and retail space.
- See more at: http://www.worldpropertychannel.com/north-america-commercial-news/greenland-holdings-investing-in-atlantic-yards-new-york-apartments-forest-city-ratner-zhang-yuliang-barclays-center-7486.php#sthash.hf80xkwt.dpuf
