CHINA - A group of Chinese investors has acquired a prime serviced residential block in Shanghai from SEB Asset Management (SEBAM)'s Asian property SICAV - the latest deal in a trend for Asian investors to replace capital from European and US pension funds.
SEBAM managing director Choy-Soon Chua denied the RMB 1bn (Rmb1 = €0.1) sale was evidence of a pullback by the fund manager into mature, correcting markets. "We feel it is an opportune time to recycle some capital, but remain keen to re-invest back into Asia," he said.
Despite an "intact" macro trend for growth in China, he forecast "volatility along the way" and pointed to difficulties in generalising across the market.
The acquisition follows Chinese fiscal tightening aimed at slowing down residential price increases. "We see that the Chinese government is very concerned with the residential markets, and they are making all the right moves to try to slow down the price increases in the sector," said Chua. "We believe there are opportunities for investment still in China. Japan could also offer some value investments and Singapore could surprise on the upside."
The sale is the fund manager's second Shanghai divestment in as many months. In April it sold the Platinum office building for €200m. However, Chua said the fund had no plans to sell any of the portfolio's remaining five properties.
Although the buyer in this transaction was a group of private Chinese investors, Chua confirmed that the fund was seeing more interest in Asian assets from local institutional investors. "The Chinese property companies and insurance companies are also active players in the market, though not necessary just in the residential sector," he said.
"Asian investors are definitely active in the market, and they would look at all sectors. The profile of Asian investors is widening, ranging from Chinese institutional investors, Hong Kong and Singapore-listed property companies, Korean pension groups and private funds, to family groups."
Don Lam, CEO of VinaCapital Real Estate forecast at a recent APREA property leaders' forum that Asian capital would replace European and US capital in the region within 5—10 years. In particular, he said, Chinese investors were looking for ‘the new China' in Vietnam, to avoid high prices in their domestic market.
In a separate development, a joint venture between private Dutch property firm Redevco and Hong Kong-listed Shui on Land has developed China's first green building.
The investors expect the retail-dominated, mixed-use complex in Hankou to achieve certification with the BREEAM sustainability standard later this year.
Simon Guy, a spokesman for BRE, the BREEAM approvals body, said the investors had selected the standard because developers and contractors in the local market could work with it. "It's a robust standard but it is also flexible and we've been working to tailor it to the Chinese market - just as we have in Latin America and the Middle East," he said.
"Redevco was already been a major user of the standard in Europe. Our feedback so far suggests that investors are looking for green labels as they come across evidence that green buildings are more marketable."