Property Developers Consolidate in China

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Greenland Holding Group has announced plans to purchase a 60 percent stake in luxury property developer SPG Land Holdings, a move which may herald a new wave of consolidation among China property developments.

The US$389 million deal would be the "largest-ever acquisition of a controlling stake in a Hong Kong-listed Chinese real estate developer by value," the Wall Street Journal reports. "Consolidation in China's property sector appears underway," the Journal headline proclaimed.

The investment from state-owned, Shanghai-based Greenland "will strengthen the financial position of the group, raise the profile of the group in Hong Kong and China, and allow the group to benefit from the strong support and resources of Greenland," SPG said in a filing.

SPG will sell the company's 50 percent stake in Peninsula Shanghai to its chairman Wang Weixian for $175 million, in an effort to sell under-performing businesses. This asset has shown losses for SPG for the last two years, according to Moody's Investor Service, which is now reviewing the new entity for a possible ratings upgrade.  

SPG Land, which focuses on the development of large, high-end residential, commercial and vacation projects, has been looking to improve its liquidity. The investment from Greenland and the Peninsula sale will allow the company to raise a total of $561.5 million to distribute a special dividend and repay current bank loans and fund projects with the remaining net proceeds, according to Bloomberg.

Shares for SPG, which will change its name to Greenland Hong Kong Holdings Ltd., resumed trading in Hong Kong yesterday after suspension on April 19, reports Bloomberg.
  
As China tightens its property policies, large real estate companies now have the opportunity to buy out developers or projects that are struggling, a practice uncommon for China. Faced with a toughening domestic market, some Chinese developers are turning to the U.S. to find projects.