China’s biggest cities are seeing a growing number of office buildings that are barely half-full, triggering rent cuts and slumping values as the world’s second-largest economy slows
[NEW YORK] A China office complex previously owned by a BlackRock fund is close to being sold at a discount of more than 40 per cent in a deal that would lead to losses for the US asset manager and banks backing it, according to sources familiar with the matter.
Since BlackRock’s fund opted to skip payments on a syndicated loan and forfeited the property to lenders led by Standard Chartered, the London-based bank has been looking for buyers, the sources said, asking not to be named because the discussions are private.
Standard Chartered is now in advanced talks to offload the two office towers at Shanghai’s Waterfront Place business zone to DCL Investments, a Chinese distressed situation specialist, for about 700 million yuan (S$97 million), the sources said. That compares with 1.2 billion yuan BlackRock paid in 2018.
It also implies a more than 10 per cent loss for banks, which provided a 780 million yuan loan, the sources added.
Representatives for BlackRock and Standard Chartered declined to comment. DCL did not respond to a request for comment.
The potential transaction shows how local investors are scooping up bargains amid the unprecedented property downturn in China, while foreign funds and companies pare exposure. DCL has been looking for distressed offices in Shanghai, the sources said.
China’s property crisis has caught many investors off guard including global banks HSBC Holdings and Standard Chartered, which have set aside hundreds of millions of US dollars of provisions against commercial real estate portfolios on the mainland.
China’s biggest cities are seeing a growing number of office buildings that are barely half-full, triggering rent cuts and slumping values as the world’s second-largest economy slows.
Prime office values tumbled about 30 per cent from their pre-Covid high in some of the nation’s major cities including Shanghai last year, according to Colliers International Group. Price pressure will likely linger in the near future, according to Cushman & Wakefield. BLOOMBERG
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