Blackstone Group Targets Chinese Malls

Blackstone Group Targets Chinese Malls

Commercial News » Asia Pacific Commercial News Edition | By WPJ Staff | November 4, 2013 1:04 PM ET

U.S private-equity giant Blackstone Group is investing in China's retail sector by purchasing a 40 percent stake in Chinese mall developer and operator SCP Company Ltd. 

Blackstone will pay $400 million for the stake, making it the group's largest shopping mall investment in Asia, according to Reuters

The equity firm expects SCP will have a total asset value of more than $2 billion after the transaction. 

"Urbanization, rising wages and an emerging middle class are all intact and will continue to grow over the medium term," Christopher Heady, Blackstone's Hong Kong-based head of Asia real estate, said in a statement. "That will be supportive of not just the mall sector, but other real estate asset classes as well,"

ICBC International Holdings, the overseas investment arm of Industrial and Commercial Bank of China Ltd, is purchasing a six percent share, as part of the deal. 

"Blackstone's role as a strategic partner to accelerate our network expansion in China and elevate our real-estate management practices to an international standard," SCP Chairman and chief executive Ding Li-ye told the Wall Street Journal.

Last April, Blackstone announced plans to raise a $4 billion fund devoted to China and Asian markets. In August, the fund made an offer to purchase Chinese property developer Tysan Holdings Ltd. for $322 million, the WSJ reports. 

Shenzhen-based SCP is an unlisted developer that owns and operates 19 malls in China, with an occupancy rate of approximately 95 percent. Tenants include fashion retailers H&M and Uniqlo, as well as Wal-Marts, the WSJ reports. 

Small and mid-sized real estate firms are looking for alternate funding sources, as China's banks are dealing with tightening lending criteria, analysts say. 

The Blackstone deal increases private equity investments in China's property sector to $1.2 billion, a 53 percent increase from last year's total, Reuters reports. 

Asia Pacific is on track for a record year of direct commercial property investments. The region recorded a 33 percent increase in direct investment during the third quarter, compared to last year. 

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