China Turns to Foreign Financing for Residential Real
Estate Development
Faced with a crackdown
on domestic real estate lending, Chinese property developers
have started to open up to foreign partnerships to finance
new property deals.
Traditionally, property development in China has been
funded by domestic, Taiwan, Hong Kong and Singapore sources.
Now, faced with scandals such as the Yang
Bin case, Chinese developers are going further to
seek funds for property development. Since external funding
is subject to a clearer and more regulated process than
domestic funding, it is easier for the central government
to manage.
The first major deal is between China's CapitaLand and
the Dubai-based Emaar Properties. Emaar Properties, the
largest property group in the United Arab Emirates, is
chaired by its economic czar, Mohamed Ali Alabbar. This
maiden fund for Shanghai property development will be
capitalized at US$100 million. Development will be for
residential properties in the Puxi region of Shanghai,
focusing on a 1.2 million square foot parcel, in which
CapitaLand has a 77.6 percent stake. This parcel has a
70-year lease, and can be developed into 2,000 condominium
units.
Morgan Stanley has also set up a venture to buy Shanghai
real estate, and has announced a US$90 million investment
in high-end real estate. Morgan Stanley has partnered
with Shanghai's Yong Ye Group and two Singapore partners
to develop Jinlin Tiandi, which is adjacent to Shanghai's
trendy Xintiandi shopping development. The project, which
is due for completion in 2005, will include 90 apartments,
106 serviced apartments and 5,000 square meters of retail
and entertainment space.
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