China Vanke Co., China’s biggest developer in terms of sales, has announced it has agreed to enter into a joint venture with Carlyle Group which will buy nine of the company’s commercial properties.
Carlyle Asia Investment Advisors Ltd. (Carlyle) will have an 80 per cent stake in the “asset platform company.”Vanke will control the remaining 20 per cent.
According to Vanke, the two companies will also establish a commercial property management company.
Vanke has stated that it is looking to seek smaller equity stakes in property projects now as the company moves to dispose of assets and focus on operations which will boost shareholder returns and its market share.
The company is striving to reduce its reliance on equity financing. Its stake sales in commercial properties contributed to a major (238 per cent) jump in investment gains in the first six months of the year compared to the same period in 2013.
The venture plans to hold its commercial properties “over a long period of time until eventual asset securitisation”according to Vanke.
The preliminary agreement is not legally binding on either company and may or may not go ahead. No financial details of the proposed venture have been made public.
Carlyle is talks with Vanke to buy stakes in nine of its shopping malls, according to Reuters. The deal has been reported to be worth between 6 and 7 million 7 yuan ($977 million). Other reports peg it as being closer to $1.6 billion.
The company has not released any details of the properties it plans to sell. It has been focused on shopping malls as well as community business streets since last year and has achieved “initial results in exploring non-residential properties”according to its annual report for 2013.
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