How the Financial Meltdown is affecting Shanghai Real Estate
The financial crisis is affecting industries around the world, it is also affecting china’s real estate market.
Three Chinese Banks reported investment exposure to the firm that recently filed fo chapter 11.
“Leading the pack” is China’s Industrial and Commercial Bank (which had to give up the title as the world’s largest bank due to the plunge it’s stock took as soon as the news surfaced), with a 151.8 Million US$.
It’s followed by Bank of China (76 Million US$) and China Merchants Bank (70 M US$).
The news had a devastating effect for the Companies stocks as mentioned earlier, Bank of China fell 17%, ICBC 25% and China Merchants Bank 27%.
BoC and ICBC have recovered but China Merchants Bank, ironically China’s most profitable bank is still 11% below the 20 Rmb Share price it had before the news hit.
Lehman and Brothers Bankruptcy actually has a closer relation to the Shanghai Real Estate Market than meet’s the Eye.
The Firm has a 6.65% Investment in the Greentown Group, a large Developer of Real Estate in Shanghai and the Yang-Tze Delta, it’s stock has since fallen 32%.
Taking a closer look we find how close many of these banks are tied to shanghai real estate market.
Citibank, Lehman and Brothers, Merril Lynch and Morgan Stanley all own significant property in the City.
As liquidity became a problem these banks tried to solve they put their real estate assets in Shanghai up for sale.
In February 2007 Lehman and Brothers acquired Shanghai’s Hongkou Fuhai Plaza for 450 Million Rmb through a property auction.
After a complete Renovation, Lehman and Brothers re-opened, re-named (to be called Sheng Bang Guo Ji or Surbana International).
Several Financial Newspapers in China have rumored that Lehman’s China Company is going to sell it’s share in the Building, but until now, space is still for rent by Lehman and Brothers
Real Estate Co. Ltd Shanghai for 5.5 Rmb a square meter a day.
The Property is located at Sichuan North Park on Sichuan North Road, nearby the new 8 Degree’s development a contender for Shanghai’s Next Xintiandi.
Morgan Stanley China a bigger player in Shanghai has been trying to spin-off some of it’s real estate assets in Shanghai.
It is selling Lanson Place for 1.1 Billion Rmb which includes 50 Parking spaces, 18′000 Square Meters divided into 108 serviced apartments and a 1300square meter club house (which also houses the ferrari shop in xintiandi).
Next in Line will be the Chataeu Pinnacle which it bought for about 760 Million Rmb back in 2006. (a hell of a deal at just 28k a square meter considering the wellington garden is selling at 50K and doesn’t have as high a profile as the Pinnacle).
Other notable property transactions by the firm are the popular Shanghai Square ( you probably been to Babyface, well it’s that building), of which it bought 92% for 846 Million Hong Kong Dollars in 2005.
They also own that weird golden skyscraper near People’s Square which is called the “World Trading Plaza”. If you’ll ever go down the are of Fuzhou Road or by the Westin Bund Center, it’s hard to miss.
Literally all golden. (see picture to the left)
The Bank owns plenty of other properties in the City and is continuing to invest, recently it’s rumored it bought a lot of units of the new Novel City Compound in Xujiahui and it has invested 1.3 Billion Yuan in a joint-venture to develop a plot of Land in Luwan District.
Citibank has already sold it’s Minhang investment in CaoHe Garden, and Merrill Lynch has it’s Nanjing West Road Project for sale.
Yet, as america’s former investment powerhouses are having a firesale other companies are looking forward to making the “investment of a lifetime”.
The Chairman of Hang Lung Properties (the developers of the Grand Gateway and Plaza 66) said they are allocating 5 Billion $ for future projects in China and already has 9 developments close to completion.
‘China is an opportunity of a lifetime and we are buying land for future projects,
the biggest opportunity in China would include the large commercial and retail investments which could still bring in double-digit returns.
Property is a long gestation industry’
Ronnie Chan told the Forbes Global CEO forum.
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