China’s biggest property developer has made its first foray into the US with a deal for a high-end residential complex.
China Vanke, the leading Chinese developer by sales, will invest in a project launched by Tishman Speyer Properties in San Francisco.
The size of the investment was not disclosed but it was small enough that Vanke announced it only on its chairman’s microblog rather than via a stock exchange filing because it deemed the amount involved to be immaterial.
But the significance of the deal is potentially greater as one of the first steps by a major Chinese commercial developer to build homes in the US. With Beijing placing caps on home purchases in major cities and many smaller cities suffering from overbuilding, Chinese developers have started to cast their sights further afield for business opportunities.
“There is no point telling Chinese companies to mind their own domestic business. A good enterprise in the 21st century must be armed with a global vision,” Wang Shi, Vanke chairman, wrote on Weibo, a popular Chinese microblog site.
Mr Wang had previously said that Vanke, which has a market value of nearly Rmb130bn ($21bn), wanted to break into foreign countries, especially those with large communities of overseas Chinese residents who are familiar with its reputation.
Vanke’s entry into the US follows that of Xinyuan Real Estate, which paid $54m last year for a plot in New York that is zoned for 200 housing units. China Development Bank, a government-controlled lender, is also looking at the US housing market and is in negotiations to provide a $1.7bn loan to Lennar Corp, one of the biggest homebuilders in the US, for two developments in San Francisco.
Vanke will take a 70 per cent stake in the San Francisco project, which is known as 201 Folsom Street, with Tishman Speyer retaining the rest, according to a note to clients by Du Jinsong, a Credit Suisse analyst.
Vanke confirmed the deal was for 201 Folsom – a 669-unit residential development – but declined to disclose any details. Tishman Speyer, an unlisted company, did not make an announcement.
The agreement was signed last week. Vanke still requires Chinese government approval to move its money abroad for the deal.
“It is still too early to gauge the ultimate impact of Vanke’s international expansion,” Mr Du said. “Nevertheless, given the structural issues of China property sector, we view this as a useful experiment by Vanke to find potential long-term growth drivers.”
Vanke announced plans last month to shift part of its stock listing to Hong Kong from mainland China. Along with bringing it a higher valuation, the presence in Hong Kong will make it easier for Vanke to raise financing for foreign acquisitions.
Additional reporting by Emma Dong
This story has been amended since original publication
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