| HONG KONG
HONG KONG Nov 29 Sovereign wealth fund
China Investment Corp. (CIC) and private equity firm Blackstone
Group have invested in a joint venture with mainland
property developer Greentown China, a source close to
the deal said.
Greentown said in June in a statement that its wholly owned
subsidiary Greentown Real Estate had formed a joint venture with
two other partners. But it did not reveal their names, calling
them just "JV Partner A" and "JV Partner B."
It turns out they are some of the biggest names in
private-equity investment. CIC, which is not allowed to invest
in China itself, has made the investment through a subsidiary
that can invest domestically, said the source, who was not
authorised to talk to the media and thus declined to be
Greentown declined to comment. CIC and Blackstone did not
immediately respond to requests from Reuters seeking comment.
The stake is particularly noteworthy since Beijing is
officially looking to calm the property market in China.
The joint venture is not a conventional developer. It will
instead focus on retirement and holiday homes, as well as
infrastructure. An investment in a conventional residential
developer would not be approved, the source said.
Greentown said it had invested 480 million yuan ($75.2
million)in capital to take a 24 percent stake in the joint
venture, with another Greentown subsidiary holding another 6
CIC subsidiary China Jianyin Investment Securities Co. is
taking a 60 percent stake in the joint venture, the source said,
with Blackstone holding a 10 percent stake.
ORDERLY PRICE DEFLATION?
Hangzhou-based Greentown China has the worst credit risk
score among Chinese developers, according to data from StarMine,
scoring just 1 out of 100. The company says it is considering
selling developments to pay off its debt load.
Shares in Hong Kong-listed Greentown China closed down 2.8
percent on Tuesday, bucking an overall 1.2 percent rise in the
Hang Seng index.
Samsung Securities wrote in a note to clients on Tuesday
that CIC's investment into the Greentown venture shows Beijing
wants to see "a stable and orderly" deflation of property
prices, rather than an abrupt slowdown.
"It also means that it is unlikely for us to see large scale
bankruptcy of developers in the sector," Samsung said. "Central
government is starting to extend its helping hand to cushion
downside of the property sector easing liquidity
in various ways to the developers."
Wee Liat Lee, Samsung's head property analyst for China,
says the central government has also started to allow
state-owned enterprises to invest in real estate again.
"They're much more flexible now," he said.