Carlyle in talks with China Vanke over potential $1b property deal

Vanke confirmed the negotiations through a regulatory filing on Wednesday, adding that it expects to enter into a memorandum of understanding (MOU) with Carlyle in the next few days. Further details of the deal were not disclosed.

According to Reuters, Carlyle is expected to buy stakes in nine of Vanke's shopping malls. People familiar with the matter value the deal at RMB6-7 million ($976 million to $1.14 billion), though some estimate it could be worth up to RMB10 billion.

The transaction would give the private equity firm exposure to China's commercial real estate market where properties carry yields of around 4.5-6%. Rental margins for commercial properties are in the region of 60-80% compared to 30-50% for residential projects. It would also generate quick return for Vanke at a time when Chinese developers are struggling for liquidity due to a slump in the residential market and a slowing economy.

In May of last year, Carlyle acquired a 49% stake in two shopping malls in Suzhou and Hangzhou owned and operated by Chinese developer SZITIC Commercial Property (SCP) as part of a strategic partnership.

Blackstone, arguably the most active real estate investor in Asia, has also targeted real estate investments in the retail segment, having acquired a 40% stake in shopping mall developer and operator SCP, last November.

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• Topics
• Greater China
• Real estate
• China
• Real estate
• The Carlyle Group