Monday, June 3, 2013

China Property Investing


Quote by Ken Kwan, author of Crazy Rich Asians


China Retail  - Over supply?

"The mainland is by far the most active development market in shopping, accounting for half of the 32 million square metres of shopping centres under construction around the world"

"Second- and third-tier cities are leading the charge. Tianjin and Shenyang are adding two million square metres of shopping floor space, more than 100 shopping centres totalling 100,000 square metres are coming up in Chengdu while 574,000 square metres of new space has recently opened in Wuhan.
The number of shopping malls will rise to 4,000 by 2015 from 3,000 last year, according to the China Chain Store and Franchise Association." ...

"Developing a shopping mall typically involves a lag time of five to six years, which makes it difficult for the market to absorb this kind of rapid growth."

The expansion is taking place at a time when the economy is showing signs of losing steam and consumer demand cooling. Gross domestic product growth slowed to 7.5 per cent year on year in the second quarter, among the lowest in recent years.
"We believe the current [department store ecosystem] downturn could last another two to three years … with or without discounting, brand operators are facing declining profitability," Leung wrote in a report.
Listed brand operators such as Belle International and Daphne International have been hit the hardest, with their shares plunging nearly 35 per cent and 51 per cent respectively this year. Leung maintained "sell" ratings on both companies.
But Adrian Cheng, founder and chairman of New World China Land and K11, is not worried. "The overall impact of mainland China's slowing luxury goods demand won't be that significant for shopping malls like K11," Cheng said.
"It's only that they are more sensitive to the price point due to sentiment reasons."
By 2018, the company expects a total footfall of 350 million and total retail sales turnover of 20 billion yuan. With Hong Kong giants New World China Land and K11 jumping into the fray, the competition rises for mainland commercial developers.
Hang Lung Properties has five commercial projects in the pipeline, with investment of about HK$40 billion in second-tier cities such as Tianjin and Wuxi. Wharf Holdings is working on five projects with a gross floor area of 2.1 million square metres that are expected to be completed between 2013 and 2016.

Developers make space for China mall wars

Developers are rushing to outperform each other in the race to build bigger and better shopping complexes in the mainland's booming market


--  SOUTH CHINA MORNING POST     2013 June 19


Carlyle buys 49% stake in two Chinese shopping malls

Carlyle Group, the world's second-largest manager of alternative assets, bought a minority stake in two Chinese shopping malls, seeking to tap a retail property boom spurred by rising domestic consumption.
A company advised by Carlyle's Asia real estate group bought a 49 per cent stake in Suzhou In-City Mall and Hangzhou Gudun In-City Mall in eastern China, both owned and operated by SZITIC Commercial Property Co, according to an e-mailed statement. The financial terms were not disclosed.
Carlyle is joining companies such as Hong Kong's New World Department Store China Ltd to invest in Chinese malls.
The country's retail sales climbed 12.8 per cent in April over a year earlier, recovering from the 12.6 per cent pace a month earlier as the Chinese leadership vowed to improve the quality and efficiency of economic growth.

MGM China gets US$190m investments for its IPO
Funds come from 4 rich investors led by hedge fund manager John Paulson

(HONG KONG) Macau casino operator MGM China, co-owned by MGM Resorts International and Hong Kong businesswoman Pansy Ho, has received US$190 million from four wealthy cornerstone investors for its US$1.5 billion initial public offering (IPO) in Hong Kong.

Billionaire hedge fund manager John Paulson is leading the pack with an investment of US$75 million, according to two sources with direct knowledge of the IPO details.

Las Vegas gaming magnate Kirk Kerkorian is investing US$50 million through his private holding company, Trancinda Corp. The nonagenarian and founder stepped down from MGM Resorts' board in April but remains a senior adviser to the firm.

Hong Kong property tycoons Poon Jing of Asia Standard and Walter Kwok of Sun Hung Kai Properties are investing US$40 million and US$25 million respectively, said the sources, who asked not to be cited by name because details of the IPO are not yet public.

Gaming revenue in Macau, the world's largest gambling market, has soared with unabated demand from mainland visitors, flocking to the only place in China where casino gambling is legal.

Revenues in the former Portuguese enclave reached US$10 billion in the first four months of the year, equalling Las Vegas's earnings for the whole of last year.

Macau's market was likely to remain a hit with investors, said analyst Victor Yip of UOB Kay Hian in Hong Kong.

'It seems like the gaming sector is a really hot sector these days, as you can tell from the trading volume, and also from the share price performance of those listed plays,' Mr Yip added. 'I am sure the IPO will show a good number of oversubscriptions.'

The launch of Galaxy Entertainment Group Ltd's new US$2 billion casino earlier this week is likely to propel even stronger revenue growth, casino magnate Steve Wynn told reporters on Tuesday.

Bank of America Merrill Lynch, JPMorgan Chase & Co and Morgan Stanley are acting as joint global coordinators for MGM China's offering.

Ms Ho, daughter of Stanley Ho - dubbed Macau's casino king for his pervasive influence over the Macau gaming sector - will sell down her 50 per cent existing stake to 29 per cent in MGM China. MGM Resorts will hold 51 per cent while the rest will be sold to the public.

MGM's links with Ms Ho have come under official scrutiny in the United States, with New Jersey's State Division of Gaming Enforcement declaring that Ms Ho was an 'unsuitable' associate due to its belief that her father has links to organised crime, prompting the firm to yield holdings in the state. - Reuters   2011 May 19

China property bonds suffer big losses
Issuers turn to outside investors as borrowing curbs at home take effect
(BEIJING) Bonds of Chinese property companies are tumbling, suffering their biggest losses in the yuan debt market this year, after China raised interest rates for the third time in four months to help fight inflation.
The seven real-estate bonds in Bank of America Merrill Lynch's China Corporate Index, including debt of China Vanke Co and Poly Real Estate Group Co, fell 0.24 per cent last week, the largest decline since the five days ended Dec 31.
Debentures issued by healthcare companies fell 0.04 per cent and carmakers declined 0.15 per cent.
Issuers such as Country Garden Holdings Co and Beijing Capital Land Ltd are turning to investors outside China as borrowing restrictions at home take effect.
'The onshore market is more sensitive to the interest rate direction than to credit fundamentals,' Steve Wang, head of fixed-income research at BOCI Securities Ltd, a unit of Bank of China Ltd, said from Hong Kong. 'Property companies can't get permission to sell bonds as the government has shut down the approval process.'
Premier Wen Jiabao pledged to curb property speculation and maintain stable housing prices in his Lunar New Year speech on Feb 1 as China seeks to control inflation, which accelerated to 4.9 per cent last month.
While the People's Bank of China has raised the one-year deposit rate three times in the past four months, to 3 per cent, the benchmark is still below Brazil's 11.25 per cent, India's 6.5 per cent and Russia's 7.75 per cent.
The yield on the 2.9 billion yuan (S$563 million) of 7 per cent September 2013 notes sold by China Vanke, the nation's largest developer, rose to a 13-month high of 5.05 per cent on Feb 14 before slipping to 4.98 per cent as at 4.28pm in Shanghai, according to exchange-traded prices on Bloomberg. The notes have the second-highest weighting of property bonds in the China Corporate Index.
China Vanke said on Feb 9 that it expects a 'sharp' drop in sales this month after revenue in January more than tripled to a record 20.1 billion yuan.
Beijing Capital Land, one of the main city's biggest landowners, sold 1.15 billion yuan of 4.75 per cent notes due February 2014 on Tuesday in the first sale of so-called dim sum bonds in Hong Kong by a Chinese property company.
Foshan, Guangdong- based Country Garden, a developer controlled by billionaire Yang Huiyan, plans to sell US$900 million of seven-year notes to yield about 11.25 per cent, according to a person familiar with the matter.
The company's US$550 million of 11.25 per cent April 2017 notes yielded 10.46 per cent as at 4.37pm, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.
'Dollar bonds can be longer term and the liquidity is better,' Estella Ng, Country Garden's chief financial officer, said on Tuesday. 'It fits our prudent management of our group's debt and the debt service requirements.'
Chinese consumer prices rose 4.9 per cent last month from a year earlier, the statistics bureau said on its website. That compares with a 4.6 per cent gain in December and the median estimate of 5.4 per cent in a Bloomberg News survey of 27 economists.
Inflation slowed unexpectedly after the statistics bureau adjusted the weightings in the basket of goods that makes up the data.
China extended property curbs this year to ensure housing remains affordable amid soaring home prices. The government last month raised the minimum down payment for second-home purchases, told local governments to set price targets on new properties and introduced taxes for homes in Shanghai and Chongqing.
Standard & Poor's, which cut its outlook this year on companies including Glorious Property Holdings Ltd, Kaisa Group Holdings Ltd and Renhe Commercial Holdings Co, said 'aggressive debt-funded expansion remains a key risk to ratings'.
'If developers continue to launch bond issues with such frequency, they could face significant refinancing risks as maturity profiles become more concentrated in a span of a few months,' S&P credit analyst Bei Fu said in the statement. 'If market conditions are not supportive nearer the bonds' maturity dates, some issuers can expect financial difficulties.'
Five-year credit-default swaps on Chinese government debt rose 7.5 basis points this year until Feb 15 on concerns that measures to curb inflation will threaten growth that's averaged about 10 per cent over the past five years. - Bloomberg   2011 Feb 17,4574,426453,00.html

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