Saturday 18 November 2017

CBRE seeks out bargains amid Chinese market slowdown

With high-valuation stocks under pressure, earnings could be subjected to even more investor scrutiny than usual.
With high-valuation stocks under pressure, earnings could be subjected to even more investor scrutiny than usual.

CBRE, which has avoided China's property market for the past five years, raised $470m (€346m) to invest in the country again as it seeks bargains amid a slowdown.

CBRE Global, with $90bn (€71bn) of real estate assets, will invest primarily in retail and residential mixed projects, Greater China country manager Richard van den Berg said in an interview in Shanghai. The amount was the biggest the company has raised in Asia in almost a decade, he said.

After four years of government restrictions to cool the housing market, home sales and property construction are sliding and have become a drag on the economy, which expanded at the slowest pace in six quarters in the first three months of the year. CBRE Global hasn't made any real estate investments in the world's second-largest economy for the past five years, said Mr van den Berg.

"These corrections will continue for another six months to maybe a year, therefore the entry point now is good," he said. "We are not foreseeing a huge correction, but sufficient enough for us to take advantage for this period of time to re-enter the market."

CBRE Global plans to invest the newly-raised capital in nine deals over two years, Mr van den Berg said.

The majority of the investments will be in China's less-affluent second-tier cities and satellite towns around Beijing and Shanghai, he said, declining to elaborate on how the capital is structured because of regulation requirements.

There wasn't enough capital to deploy during a transitional period after Los Angeles-based CBRE Global acquired a majority of ING Groep NV's real estate investment business in 2011, Mr van den Berg said in relation to why the investor waited for five years before re-entering the Chinese property market.

"We would have entered 2011 and 2012," he said. "That would've been a good period of time to acquire land."

China's home prices rose 31pc from 2009 to 2013, according to data from the national bureau of statistics. Even as the government started curbing the market in April 2010, home prices rose 24pc in the 2010 to 2013 period.

The property measures are starting to show some signs of working. Home prices fell for the first time on a monthly basis in May since June 2012, according to SouFun Holdings., China's biggest real estate website owner.

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