China’s Fosun emerges as new force in Europe real estate

Guo Guangchang’s Fosun has been linked with a dozen potential European acquisitions since unveiling plans in 2013 to buy chunks of real estate in the world’s major cities.

Although it remains to be seen how many of these deals the Chinese billionaire will eventually wrap up, what’s clear is that the Shanghai-based investor has emerged as a new force in European real estate.

China’s largest private conglomerate with a market capitalisation of $3.9 bn (€3.4 bn), Fosun made its first foray abroad last year when it purchased New York’s Chase Manhattan Plaza for $725 mln and London’s Lloyds Chambers for £64.5 mln.

Over the past months, the company has joined the bidding for Berlin’s Potsdamer Platz, one of Europe’s most iconic ensemble of buildings, broker C&W (eventually taken over by peer DTZ) as well as a major stake in European asset manager Resolution Property.

These moves are believed to be part of Fosun's newly launched continental European investment strategy. According to well-informed market sources, the group recently recruited Antoine Castro as head of real estate Europe to sound out investment opportunities across the Continent.

Investment banker at helm
An economics graduate from the elite Sorbonne University in Paris, Castro previously worked for Morgan Stanley where he served as executive director and senior officer in the real estate division as well as for the Goldman Sachs-owned Archon Group. In 2012 he joined Quantum Global where as managing director he spearheaded the real estate activities, leading the £1 bn Plaza joint venture which recently secured deals in New York, London and Munich.

'Fosun has a very streamlined decision-making chain,’ a source told PropertyEU. Castro, who is responsible for real estate Europe, reports to Alex Gong, the global head of real estate investment, who reports directly to the company’s founders led by Guangchang, the source added.

PropertyEU also understands that the European acquisitions will likely be made through the group’s Portuguese insurance arm, Fidelidade, which was bought in late 2014 in the biggest acquisition involving Chinese and European financial institutions since 2008.

Xiaoliang, president of Fosun Property, the company’s real estate arm, recently told the press that the group is on the hunt for 'office, hotel and residential assets in cities such as Paris, Hamburg, Frankfurt, and Lisbon'. However, little is known about the group’s strategy (Fosun did not respond to an interview request by PropertyEU).

In the two European acquisitions inked so far, Fosun has shown a taste for assets offering (re)-development potential in crisis-hit countries such as Italy and Greece. In Italy, the group bought Unicredit's former headquarters at Milan’s central Piazza Cordusio for €345 mln. The complex, which is only 30% occupied, dates back to the early 1900s and provides around 50,000 m2 of office space in central Milan.

In Greece, the Chinese investor is believed to have teamed up with Greek partner Lamda Development and real estate developer Al Maabar from Abu Dhabi to invest €915 mln in a 99-year lease on a 620-hectare site at Athens’ former Hellenikon airport.

According to local press reports, the three partners are planning a €6.8 bn integrated resort on the site, including luxury residences, two hotels, a casino, shopping mall, exhibition centre and concert facilities. The site already includes a 337-berth marina and has 3.5 kilometres of waterfront.

Record investment
Europe emerged as one of the top destinations for Chinese foreign investment globally last year when investment hit a new record of $18 bn (€25 bn), partly driven by new sectors including real estate, according to research from Baker & McKenzie.

From virtually zero before 2013, Chinese investment in European commercial real estate surged to $2.8 bn in 2013 and $3 bn in 2014, not including future development costs. ‘What we're seeing is the maturing and normalisation of Chinese investment processes in line with the international economy,’ said Thomas Gilles, chairman of the EMEA-China group at Baker & McKenzie.

A downturn in the Chinese domestic market in 2013 and 2014, and the boom in the overseas Chinese population during the same period – tourists, student, and emigrants - were the major drivers for outbound real estate FDI. Policy liberalisation for outward investment by institutional investors such as sovereign wealth funds and insurance companies also contributed to greater real estate investment, the law firm said.