Residential prices could plateau in H22010 but major correction unlikely

RENOWNED short-seller Jim Chanos sees a property bubble on the verge of bursting in China. But other well-known investors disagree – and on their side of the fence is CB Richard Ellis president and CEO for Asia Chris Brooke.

Residential prices in China could plateau in the second half of this year but a major correction is unlikely, he said in an interview with BT.

He also believes that large parts of the Singapore and Hong Kong property markets are not in risky territory.

For China, 2010 could be ‘a year of consolidation and stabilisation and getting back to a more sustainable market’, he said. ‘Residential prices could probably increase a little bit in the first half and stabilise in the second half.’

Price growth in China has slowed in the past few months, Mr Brooke said. There is a seasonal effect – buying tends to ebb during the festive period.

Government measures to cool the property market have had an impact, he said. For instance, the China Banking Regulatory Commission told banks last month to raise downpayments and interest rates for third mortgages.

Such initiatives have dampened sentiment. ‘Buyers take a step back and say ‘maybe I’ll wait and see what happens before I make that decision’,’ Mr Brooke said.

The government could implement more measures to calm the market, he said. ‘Policy risk is always there in China. The government has probably more involvement in the market there than anywhere else.

‘But because the real estate sector as a whole is an important part of broader economic growth, I think the government will look to strike a delicate balance.’

Naysayers are worried not just about fervour in China’s residential sector but a potential supply glut in its commercial sector. Reports of buildings left vacant while massive new ones take shape have fuelled more talk of a bubble.

But Mr Brooke is sanguine. It may take several years for supply to be absorbed, but there will be demand from multinational corporations and domestic companies, he said.

For instance, there has been strong demand recently for offices in Beijing, where rent for Grade A space may have bottomed.

As for Hong Kong and Singapore, he sees limited speculation but little policy risk. Recent anti-speculative measures introduced in both markets have signalled that the authorities are keeping a close eye, he said.

In Hong Kong, home prices shot up in the luxury segment but rose at a more measured pace in the mass to mid-market. As such, prices have more room to grow this year in the mid-market than in the luxury segment, Mr Brooke reckons.

Source: Business Times, 4 Mar 2010

China’s property market will probably go through a “more meaningful correction” this year because the price gains in 2009 aren’t sustainable, according to Mr Christopher Lee, corporate ratings director at Standard and Poor’s.

The outlook for the Chinese market is “neutral” for this year, Mr Bei Fu, an associate director of corporate ratings at S&P, said during a conference call with Mr Lee on Thursday.

“The middle of this year could be a potential turning point for many developers,” Mr Fu said. “A combination of slower demand, higher supply and various government initiatives will dampen market sentiment.”

China’s property prices surged 9.5 per cent in January, the most in 21 months, as total new loans surged to 1.39 trillion yuan ($287 billion), more than in the previous three months combined.

The China Banking Regulatory Commission ordered banks last month to “strictly” follow property lending policies.

Investors tend to “sit on the sidelines” in anticipation of more tightening measures to curb property price gains this year, Mr Lee said.

Gradual and Cautious

Beijing will scrap some home-purchase incentives after the jump in prices, reducing the scope of a housing sales-tax exemption and enforcing a 40-per-cent down-payment requirement for second homes, the capital’s Municipal Commission of Housing and Urban-Rural Development said earlier this week.

The People’s Bank of China raised the reserve requirement by 50 basis points for the second time this year on Feb 12 to slow bank lending. The hike came into effect on Thursday.

The central bank said in its quarterly report that it wanted to gradually normalise monetary conditions from a “crisis mode” after gross domestic product grew 10.7 per cent in the fourth quarter, the fastest pace in two years.

“Policy introduction this year will be in a gradual and cautious manner,” Mr Fu said.

“Stability will be the focus.”

The Chinese government will increase supply of subsidised public housing this year to provide affordable accommodation for people with lower incomes, and there will be a “surprise” in the number of available luxury homes by the middle of this year, when projects started one year ago are completed, leading to stronger competition among developers, she said.

Industry Consolidation

“Bigger and stronger property players will do even better as they have the scale and financial resources to grow, and smaller companies will find the market condition more challenging,” Mr Fu said. “We expect to see more merger and acquisition activities in the sector.”

China Overseas Land & Investment, a developer with a BBB- credit rating from S&P, the highest among 11 Chinese developers the ratings company analysed, will benefit from industry consolidation this year, S&P said. China Overseas, which is owned by the nation’s construction ministry, is poised for a “possible upgrade,” the report said.

Companies rated B+ and below, including Greentown China Holdings and Shanghai Zendai Property, may become potential acquisition targets, according to the report.

Source: Today, 27 Feb 2010

Beijing will scrap some home purchase incentives after property prices surged, reducing the scope of the housing sales-tax exemption and enforcing the 40 per cent down payment requirement for second homes.

Homes sold after being owned for five years will be exempt from the tax, compared with two years previously, the Beijing Municipal Commission of Housing and Urban-Rural Development said in a statement posted on its Web site late on Tuesday.

The measures are aimed at curbing investment and speculative purchases and at balancing supply and demand, according to the statement.

China’s property prices surged 9.5 per cent in January, the most in 21 months, as total new loans surged to 1.39 trillion yuan (S$286.8 billion), more than in the previous quarter combined.

The China Banking Regulatory Commission told banks last month to ’strictly’ follow property lending policies.

Beijing will also tighten rules on home purchases by foreigners, temporarily relaxed after the financial crisis. Non-Chinese resident for less than a year can’t buy properties and qualified purchasers are limited to one home, the statement said.

The local government will also adopt administrative measures to help developers speed up construction and sales, the government agency said.

Source: Business Times, 25 Feb 2010

It upgrades S’pore- listed Yanlord Land Group to ‘buy’ from ‘neutral’

China’s property developers had their share-price estimates lowered by as much as 32 per cent at Goldman Sachs Group Inc, which cited increased uncertainty from government tightening measures.

Goldman Sachs’ new target prices reflect a discount of as much as 40 per cent to the companies’ asset values, compared to a maximum 30 per cent previously, analysts led by Yi Wang wrote in a report yesterday. Still, a recent slump means that the shares are only 8 per cent higher on average than the estimated ‘bear-case’ net asset values (NAV) for end-2010, they said.

Real-estate stocks on the MSCI China Index have declined an average 7.9 per cent over the past six months, compared to a gain of 0.8 per cent for the broader gauge, according to data tracked by Bloomberg. China’s property prices surged the most in 21 months in January, prompting policymakers to tighten home lending and order banks to set aside larger reserves to slow credit growth.

‘Although we believe the purpose of this tightening is to slow, rather than reverse, China’s economic recovery, we believe it could affect the pace of developers selling properties or realising their land-bank value in the near term and could therefore weigh on share-price performance,’ the analysts wrote.

Goldman Sachs downgraded Greentown China Holdings Ltd and Shenzhen Investment Ltd to ’sell’ from ‘neutral’. They also upgraded Singapore-listed Yanlord Land Group Ltd to ‘buy’ from ‘neutral’ and raised their rating for Franshion Properties China Ltd to ‘neutral’ from ’sell’.

‘We like stocks that screen as having significant potential upside to our base-case valuations as well as limited downside to our bear-case NAV,’ the analysts wrote. ‘We view our bear-case NAV as attractive entry levels.’

Chinese property stocks, trading at the cheapest level among Asian peers, may be ‘worth another look’, Credit Suisse Group AG said last week.

Shares of the nation’s real-estate companies have underperformed the MSCI China by almost 30 per cent since July and are trading at a 7 per cent discount relative to the region based on a model that values companies’ net assets and return on equity, which may signal that risks of tightening are already factored into prices, Credit Suisse said.

Source: Business Times, 23 Feb 2010

SENTOSA COVE was like Treasure Island for developer Ho Bee, which surfed on the wave of demand for high-end property at the enclave to make a mint. Then the tide went out.

The financial crisis and the crash in prime real estate suddenly gave the exclusive seafront estate a forlorn air and Ho Bee the look of a firm that had overplayed its hand.

The developer dismissed such concerns back then and it continues to maintain that the enclave will be a winner.

Ho Bee got in early on Sentosa Island, bought aggressively and made piles of money selling the developed units.

But when the downturn hit, that close association with Sentosa meant it quickly fell out of favour with investors.

Ho Bee shares dived to a 52-week low of 27.5 cents each at one point in March last year, but shares have since climbed as high as $1.90 in January.

There seemed cause for concern. Ho Bee, with IOI Properties, bought The Pinnacle Collection, the last condo plot on Sentosa Cove for $1.097 billion or a whopping price of $1,822 per sq ft (psf) of potential gross floor area just before the crisis set in.

Ho Bee chairman and chief executive Chua Thian Poh told The Straits Times he remained confident of the prospects of Sentosa Cove properties throughout the crisis because they are scarce.

But the market and analysts did not share that view. By early last year, Sentosa Cove values had plunged and there was talk of defaults. An agent reportedly said the enclave had lost its appeal.

Data from Colliers International then showed that some non-landed Sentosa Cove properties were sold at an average of $1,318 psf, or 46 per cent below the average of $2,431 psf at the peak in early 2008.

There were also fears of deferred payment scheme (DPS) defaults. Ho Bee completed four projects last year – The Coast, Vertis, Quinterra, Orange Grove Residences – that exposed it to risks from DPS defaults.

‘At the beginning of last year, many people were looking at whether those who bought under the deferred payment scheme could fulfil their obligations to complete their purchases,’ said Mr Chua.

‘Our board was very cautious. We went through a lot of simulations on what was the worst scenario.

‘We talked about a 10 per cent default, 20 per cent default on DPS and even up to 50 per cent default. But we were still very comfortable with it.’

Concerns lingered for a while as consumers had trouble getting financing at one point, said Mr Chua. But the situation turned the corner sooner than expected and DPS concerns evaporated.

Ho Bee said it has had just one default for The Coast in Sentosa Cove and one for Orange Grove Residences.

‘We hope to have more people default so we can then take (the property) back and resell it straightaway at a higher price,’ said Mr Chua with a laugh.

‘Most developers should be quite comfortable during the last six to eight months of 2009.’

While the financial crisis has not flattened Ho Bee as some have feared, it has given it an opportunity to reflect.

‘You focus on… your next step. You have time to think,’ said Mr Chua.

Ho Bee started to explore overseas opportunities at the start of last year, a strategy it used before. It moved to London during the 1996 property peak here to avoid a property bubble that it was convinced would burst.

The bubble did burst and Ho Bee found that its British move was a godsend: Its main income until 2000 came from London.

Things are not that desperate now. Prices have risen. Take Ho Bee’s The Coast condo: Sub-sale deals went for as low as $1,195 psf early last year but has since bounced back to above $2,000 psf, though deals are few.

Its gamble on Sentosa Cove has paid off, although the market has changed much in the past five years, making life harder for developers.

‘Previously, when you bid for land, your margin may be low, but you still have a margin,’ said Mr Chua.

But developers are now bidding for land at forward prices, he said.

‘You look at the Singapore market. Almost every project is an ad hoc project as you can’t have a big land bank.’

Ho Bee had the first mover advantage in Sentosa Cove, ‘but when you build up the market, you have to compete with other developers for the land in Sentosa.

‘Now, you are getting more and more competition in the bidding of land… less margins and more competition… so our next push will be to venture overseas,’ said Mr Chua.

Over the next one to two years, Ho Bee hopes to deploy 30 to 40 per cent of its capital overseas, focusing on residential and mixed development projects.

China is under intense scrutiny. The company is in the midst of a study on jointly developing a residential project in Tangshan Nanhu Eco-City with Yanlord Land Group. It also just acquired a residential development site in Shanghai with the same partner.

‘In China, you can have a big land bank. Land cost is only about 20 per cent to 30 per cent of project cost,’ said Mr Chua. ‘In Singapore, it is about 50 per cent to 70 per cent, so you can’t afford a big land bank here.

‘Hopefully, China will become our Sentosa Cove in two to three years.’

Source: Straits Times, 20 Feb 2010

In the hard, exhaust-choked reality of his days trawling Longhua’s clogged roads, taxi driver Zhang Bo’s ambition to buy a small flat for his young family has slipped out of reach for now.

Like many Chinese who covet real estate as a symbol of stability and social stature, Zhang is dismayed at the alarming climb of apartment prices in his adopted city of Shenzhen in southern China.

‘People can’t afford new flats anymore,’ said Zhang, 28, who drives a taxi to make ends meet after his small electronics factory went belly-up during the financial downturn last year.

‘It’s a very distant goal for us. Something we can only dream about,’ said the spiky-haired native of Hubei province, who takes home around 6,000 yuan (S$1,200) in cab fares a month.

He likes to joke that he now has to work three months just to buy one square metre of residential space in the city’s suburbs.

As one of millions of workers gravitating to China’s major cities in search of work and opportunity, Zhang’s plight mirrors the dilemma faced by many Chinese who are beneficiaries of the country’s economic rise, but who are nevertheless finding it increasingly difficult to own a roof over their heads.

‘The affordability is deteriorating because of the rapidly rising prices and increasing mortgages for home buyers, particularly for investors,’ said Xavier Wong, head of research for greater China at property consultant Knight Frank.

In January, property prices in 70 cities across China rose 9.5 per cent from a year earlier. The eighth consecutive year- on-year rise added to worries of a real estate bubble.

Stephen Green, a China economist at Standard Chartered noted in a report in early February that at least seven cities saw land prices triple in 2009. ‘This is clearly bubble territory for the land markets in many cities,’ he wrote.

The property bubble has become a hot social topic, spawning TV shows, Internet chatter, books and buzzwords such as ‘house slaves’, while the growing ranks of hard-up Chinese couples opting to marry without a home, car and other traditional middle class trappings are dubbed ‘naked marriages’.

A popular TV drama called ‘Dwelling Narrowness’, depicting the tribulations of a family in a city modelled on Shanghai struggling to buy their own apartment, was yanked from the airwaves in some places, hinting at government sensitivities towards the subject matter.

The migration of grassroots families and graduates in major cities to cheap, rented digs on urban fringes, could pose a socio-economic challenge for the government as the middle class malaise could fuel protests and threaten Communist Party rule.

Risks of an asset bubble forming have prompted Beijing to tighten monetary policies to help cap price rises in land and residential markets, with major developers, such as China Vanke watching future policies closely.

For the second time this year, China last week raised the level of reserves banks must hold in a move that could dent demand for risky assets.

Analysts said the government could deploy other tools as well, such as mortgage rates, lifting downpayments of second homes and slapping a property tax to cool the sector.

The measures appear to be working, with sales of new and existing homes down across the country in January, leading to dampened sentiment and a slide in prices in some cities.

Analysts say, however, that the government may not be able to rein in the property sector too aggressively since it is a main pillar of the economy with its investments accounting for over 10 per cent of gross domestic product.

‘The central government is trying to get the price down for a short period of time. They’re squeezing out the people with money to allow the middle class to be able to afford (property) again,’ said Andy Xie, an independent China economist.

‘(But) the local developers who have liquidity know the game. They’ll be asking why should I discount now and sell to poor people when I know the government will come around and open this up again so that they can sell to rich people again.

‘It’s very much a political economy thing,’ he said.

Analysts said a common way of calculating affordability of housing was to measure the percentage of monthly household income needed to pay up mortgage instalments and anywhere between 30 and 40 per cent was deemed reasonable in Asia.

‘You will find that the ratio (in China) is very, very high. (It’s) very unaffordable because a lot of cities – we’re talking about 60 per cent to 70 per cent of their monthly household income – needs to be used for monthly mortgages,’said Wee Liat Lee, an analyst at Nomura International.

‘But the problem with this measure is that you forget the fact that income is extremely skewed in China,’ he said, referring to the ability of many home buyers to pay for their apartments due to the one-child policy, with parents and grandparents pooling their savings to fund the purchases of the only children who are now old enough to own homes.

Overall, analysts say housing prices may rise further, though at a more modest pace than last year as the government is pushing for more affordable housing to hit the market later this year.

Source: Business Times, 18 Feb 2010

13.69ha residential plot costs 3.8b yuan, expected to yield at least 2,000 units

YANLORD Land Group and Ho Bee Investment have jointly acquired a 13.69 hectare prime residential site in Qingpu District, Shanghai, for 3.82 billion yuan (S$785 million) at a public land auction.

With a total planned gross floor area of 246,487 sq m, the purchase price equates to 15,498 yuan per sq m.

Yanlord, through its subsidiary Shanghai Yanlord Yangpu Property Co, will have 60 per cent equity in the project, while Ho Bee will have 40 per cent.

The project is expected to generate at least 2,000 units to be launched in phases over six to eight years, with initial sales to begin in two years, Ho Bee executive director Ong Chong Hua told BT.

The development cost, according to market sources, could run to about 23,000 yuan per sq m – which will be shared between the two developers on an equitable basis. The units could be sold at an average price of at least 35,000 yuan per sq m, market sources indicated.

‘We are confident this project will be well received by home buyers seeking to live in a conducive international community and will contribute positively to Ho Bee’s future developments and initiatives within the Greater China market,’ said Chua Thian Poh, Ho Bee’s chairman and chief executive officer.

The latest acquisition extends an earlier collaboration between China-focused Yanlord and Singapore developer Ho Bee in Tangshan. Last October, their Singapore joint venture company Yanlord Ho Bee Investments signed a memorandum of understanding with the Tangshan Nanhu Eco-city administrative committee to explore developing a high- end residential project in Nanhu Eco-City.

Zhong Sheng Jian, Yanlord chairman and chief executive officer, said the group is confident the latest joint acquisition in Shanghai will contribute significantly to Yanlord’s growth.

Given the growing scarcity of sizeable prime residential development sites in Shanghai’s city centre, the acquisition ‘presents a unique opportunity for investment in large-scale high-end residential developments’, he added.

Situated 5.5 km from the heart of the Hongqiao Commercial District, the Qingpu site is expected to tap the district’s emergence as an integrated financial, commercial and logistics hub servicing the Yangtze River Delta region.

It will also benefit from strong connectivity, through the city’s metro network, key thoroughfares and railways such as the Beijing-Shanghai and Shanghai-Hangzhou express lines.

‘It’s a good collaboration,’ Ho Bee’s Mr Ong said. ‘Yanlord have done quite a number of high-end residential projects, in fact townships, and we hope to leverage on their experience and the premium branding they have. Most of Yanlord’s projects are sold at a premium.’

Source: Business Times, 18 Feb 2010

TWO Singapore-listed property groups, Yanlord Land and Ho Bee Investment, have acquired a 13.69ha residential development site in a fast-growing area of Shanghai for 3.82 billion yuan (S$789 million).

This is the first joint venture bet-ween Yanlord, based in China, and local firm Ho Bee, after they inked an agreement last October to explore investment options in Tangshan, China.

Yanlord will have a 60 per cent stake in the Shanghai project, while Ho Bee is taking the remaining 40 per cent.

The site is in Shanghai’s Qingpu site, 5.5km from the Hongqiao commercial district, which has been earmarked by the authorities for major development as a financial and transport centre.

‘This latest acquisition will tap on the emergence of the Hongqiao commercial district as a key economic, financial, commercial and logistic hub servicing the greater Yangtze River Delta region,’ said Ho Bee chairman Chua Thian Poh in a media statement.

He added that the development site was ‘ideally situated within the Qingpu Tujing Township, which has in recent years emerged as a high-end international residential community in western Shanghai’.

Yanlord chairman Zhong Sheng Jian was equally upbeat about the project.

‘The latest acquisition of the Qingpu land parcel reflects our continued confidence in the potential of Shanghai’s real estate sector and presents a unique opportunity for investment in large-scale, high-end residential developments amid the growing scarcity of sizeable prime residential development sites within Shanghai’s city centre,’ he said.

He said the company would draw on its past experiences in Qingpu district in key projects there such as Shanghai Yanlord Riverside Gardens and Yunjie Riverside Gardens.

‘We are confident that our ability to amalgamate quality, aesthetics and functionality will lead to the creation of another landmark international residential development,’ Mr Zhong said.

The two firms teamed up last October to explore a project to build residential properties at Nanhu Eco-City on the outskirts of Tangshan, in north-eastern China.

However, the project has been put on hold while the two firms wait for the authorities to release the land for tender.

On the stock market yesterday, Yanlord gained three cents to close at $1.79 while Ho Bee rose six cents to $1.80.

Source: Straits Times, 18 Feb 2010

With savings earning paltry returns and inflation rising, property is seen as best bet

FAN Wenbao swears he is not in the business of speculating on property. Already the owner of one home in Xinyang, a grimy city in the poor central province of Henan, he bought two more there last year.

‘It’s an investment not to make money but to save money. Interest rates in the bank are too low,’ said Mr Fan, a real estate agent in a shiny silver suit.

‘If I buy now, the property will steadily increase in value. And at least there’s no way it can fall.’

This might sound like the talk of a speculator in most places, but Mr Fan’s is a relatively long-term view when it comes to the Chinese housing market.

He is not engaged in the kind of rapid buying and selling known as chaofang, or stir-frying of homes, that has driven prices up by 50 per cent in just a few weeks on the tropical island of Hainan, home to the country’s hottest real estate.

In Mr Fan’s hometown of Xinyang, many of whose one million people migrate to prosperous coastal areas for work, property prices rose a mere 10 per cent last year.

But that is already enough to worry the central bank nearly 1,000 km north in Beijing.

Property beckons homeowners and speculators as the one asset in China that is performing well, and authorities are stepping up efforts to prevent a potentially destabilising housing bubble from forming in the world’s third-largest economy.

Even the comparatively modest price appreciation seen in Xinyang clearly outstrips the country’s benchmark deposit rate of 2.25 per cent.

With inflation picking up and expected to flirt with 5 per cent this year, people like Mr Fan are waking up to the fact that their savings are at risk sitting in bank accounts.

Investment alternatives are few and far between in China. The stock market has been sluggish for nearly half a year and foreign investments are all but closed to ordinary people.

Property, of course, has additional appeal. ‘The old parts of the city are in bad shape. These developments are modern, spacious and full of greenery,’ said local travel agent Ma Zhong, 25, strolling through Xinyang’s new district of government buildings, shopping centres and apartment complexes, vast swathes of which are still under construction.

The big question hanging over the Chinese property sector is the extent to which demand has come from owner-occupiers as opposed to investors hoping to quickly flip homes for a profit.

Rampant price rises in recent months persuaded Beijing to begin clamping down on speculators, fearing the fallout if any bubble were left to grow to monstrous proportions.

When real interest rates fell in 2007 as inflation rose, households shifted vast amounts of savings into the stock market, fuelling a steep rally. Its sudden collapse contributed to a loss of confidence that slowed the economy over the next year.

The obvious answer now would be to raise interest rates. But doing so could draw hot money from abroad into an economy already awash in cash and make it difficult for local governments to service the piles of debt that they racked up last year.

‘Beijing’s strategy instead is to set up an ugliness contest: bank deposits are becoming unattractive, so administrative measures are used to make asset markets more unattractive still,’ said economist Paul Cavey with Macquarie Securities in Hong Kong.

He concluded in a recent client note that the government was winning the battle, for now.

A succession of pledges to crack down on reckless investment and steps to make second mortgages and transactions more costly have dampened sentiment. Programmes to build more affordable housing are also weighing on prices, even as they shape up as an engine of real estate investment in the coming years.

Sales of new apartments and existing homes in Beijing fell some 70 per cent in the first three weeks of January from a month earlier, local media reported recently. The central bank’s moves in recent weeks to curb excessive loan growth have also hastened the slide in Chinese share prices and roiled markets worldwide.

But policymakers would be premature in assuming that they have seen off a housing bubble.

Last Sunday in Xinyang was damp and chilly. The streets and shops were quiet.

Yet a steady flow of people visited the showroom of Bolin Harmonious Home, a 26-building complex that started selling its first block of apartments last year. The homes are surrounded by muddy fields, a 10-minute drive from the nearest office or mall.

‘On the first day, almost all of the 400 units sold out. We’ve got the next phase coming on sale soon and we expect strong demand over Spring Festival,’ said Zhang Jing, 28, a saleswoman, referring to the Chinese New Year holiday next week.

‘Things are developing a little bit quickly but these are great homes. They are convenient and have great potential,’ she said.

Source: Business Times, 11 Feb 2010

A private real estate fund under Mapletree Investments will be buying a Grade A office building in Beijing for 2.9 billion yuan (S$0.6 billion).

Mapletree India China Fund (MIC Fund) will be taking over a special purpose vehicle holding legal and beneficial title to Beijing Gateway Plaza from Hong Kong-listed RREEF China Commercial Trust (RREEF CCT).

The purchase – subject to approval by RREEF CCT’s unitholders – will raise the value of MIC Fund’s portfolio to around US$1 billion.

Beijing Gateway Plaza sits in the Chaoyang district and comprises two 25-storey office towers linked by a three-storey retail podium. There are also three levels of carpark below ground. Above-ground gross floor area comes up to around 1.106 million sq ft.

‘China is an important investment market for us and with Beijing being the capital city of China, we are confident that the demand for good quality office space will continue to grow,’ said Mapletree CEO Hiew Yoon Khong.

‘There is limited new supply of Class A office space over the next few years and we expect occupancy and rental rates to trend upwards.’

According to Mapletree, Beijing Gateway Plaza has a ’strong’ tenant base which includes multinational corporations and domestic enterprises.

MIC Fund raised US$1.16 billion in committed capital and was set up to invest in office, retail and residential real estate in China and India. The Beijing Gateway Plaza deal marks its fourth acquisition in China.

The fund also invested in Future City in Xi’an, Mapletree Tower in Beijing, and Nanhai Business City in Foshan.

MIC Fund comes under Mapletree, a real estate capital management company. Mapletree owns and manages assets of about $12 billion, spanning the office, logistics, industrial, retail and lifestyle sectors across Asia.

Source: Business Times, 12 Feb 2010