Blackstone eyes four Shanghai buildings

August 14, 2008
Blackstone eyes four Shanghai buildings
Package of four commercial buildings may go for US$1b

(SHANGHAI) Global buyout funds and property investors including
Blackstone Group are vying to buy up to four commercial buildings in
Shanghai for as much as US$1 billion, three sources with direct
knowledge of the matter said.

Super Ocean Group, whose chairman is high-profile businessman Ye
Lipei, has put a package of four buildings on sale as it seeks cash
to support its growth in other sectors, the sources told Reuters
yesterday.

The four buildings to be sold by Super Ocean include the Bank of
Shanghai Tower in the Lujiazui area of Shanghai's Pudong financial
district; and Southern Securities Mansion, located on Nanjing Road,
one of China's busiest commercial streets, the sources said.

Super Ocean aims to sell the four buildings together but potential
bidders have the option to purchase three of the four, said the
sources, who did not want to be identified because the deal was not
finalised. They put the price tag for the deal at five billion yuan
(S$1 billion) to seven billion yuan.

Representatives for US-based Blackstone could not immediately be
reached for comment. Super Ocean declined to comment.

Two of the three sources said that no deal had been reached yet and
talks between Blackstone and Super Ocean could collapse over
valuation of the buildings. The third source said that Super Ocean
aimed to complete the deal by the end of this month.

'It's not easy for Blackstone and Super Ocean to reach a deal as
Super Ocean is probably asking too much for these properties,' said
one of the sources.

'There are also concerns about the ownership structure, which is a
bit complicated for some of the four buildings,' he added.

The seven billion yuan price tag for the four buildings in the
proposed package deal was offered by Super Ocean late last year for
bidders' reference, though the final price could be lowered amid
growing concerns about global property investment.

In China, the government has clamped down on bank lending for
construction and imposed various measures including taxes and new
rules to try to stamp out property speculation.

Although aimed at the residential market, the steps are cooling
appetite for land and starving property firms of funding, and could
also put downward pressure commercial property prices.

Besides Blackstone, other potential buyers include Ireland's Treasury
Holdings and an Australian asset manager, which the sources declined
to name.

Negotiations between Treasury Holdings and Super Ocean stalled over
price issues several months ago, said one source.

But Blackstone and the Australian fund are still separately in talks
with the Chinese developer, the other sources said.

Treasury Holdings declined to comment. The Dublin-based firm
established and owns a 46 per cent stake of China Real Estate
Opportunities, listed on the AIM market at London Stock Exchange in
July 2007.

In June, Blackstone agreed to pay 1.1 billion yuan for a commercial
building in central Shanghai, making it the first foray into China's
property market.

Last week, Blackstone, in which China's sovereign wealth fund holds a
stake, opened a Beijing office and hired a former government official
to expand its acquisition business in China.

Earlier this year, Morgan Stanley planned to sell at least two
service apartment projects in Shanghai, which are wholly owned by its
real estate fund, for several billion yuan, people familiar with the
situation told Reuters. That deal has not been completed yet.