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Chinese Property Developer Makes First Foray into US Real Estate Market

China Vanke Announces Residential Property Investment in San Francisco

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China Vanke Teams Up with Tishman Speyer

China Vanke Co. (SHE:000002), China’s largest property developer by market value, has made its first foray into the US real estate market by cementing a deal for a high-end residential complex in San Francisco. The companywill invest in a project launched by US property developer Tishman Speyer Properties. Without disclosing the size of the property investment, Vanke’s chairman Wang Shi has written on his micro-blog on Weibo, a popular Chinese Twitter-like medium, that the deal with the US group was signed on 12 February 2012.

Citing information from Vanke, Jinsong Du, a Hong Kong-based real estate analyst at Credit Suisse Group AG, wrote in a client note that under the agreement the Chinese property developer had acquired 70 per cent of 201 Folsom Street, a mainly high-end residential project owned by Tishman Speyer. Du further revealed that the development will comprise two towers, rising 37 and 42 storeys, and two eight-storey plaza buildings, with a total of 669 residential units and street level retail. The project is about two blocks away from the Embarcadero waterfront -- San Francisco’s financial district.

Vanke “Armed with a Global Vision”

The San Francisco deal is Vanke’s first property investment outside Asia and comes after the company’s Hong Kong unit jointly won a bid for a site in the city, marking its first project outside the Chinese mainland. Last month, the Shenzhen-based developer teamed up with Hong Kong’s New World Development Co (HKG:0017) to buy a residential site for HK$3.43 billion (£284 million).

The winning bid came after China Vanke announced that it wanted to break into foreign countries, especially those with large communities of overseas Chinese residents who are familiar with its reputation. Wang wrote on Weibo: “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.”

Vanke board secretary, Tan Huajie, echoed Wang’s statement, saying that “after 30 years of development, our ‘going global’ strategy is on the agenda, and access to an open international capital market is highly necessary for such a strategy”. Noting that last year China Vanke set up a special team to research business development in the US, Tan added: “I believe it [the company] could make some progress [in the US] this year.”

Vanke’s Property Investment Marks First Venture into US Market

Indeed, the recently-announced deal with Tishman Speyer Properties is very significant for China Vanke, being as it is one of the first steps by a major Chinese 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.

Credit Suisse’s Jinsong Du, commenting on Vanke’s latest property investment and global expansion plans, observed: “It is still too early to gauge the ultimate impact of Vanke’s international expansion. 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.”

On 18 February 2013, the China Vanke share price reached a three-week low, falling 2.7 per cent to 11.7 yuan at the close of trading in Shenzhen.

 
 
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