Blackstone exits Evergrande JV

The New York-based private equity and real estate firm has sold a 40 percent stake in a luxury residential development on behalf of a large Asia fund inherited through the takeover of Bank of America Merrill Lynch’s private equity real estate platform.

The Blackstone Group has sold out of a development joint venture with Evergrande Real Estate Group, one of China’s largest real estate developers, in a deal valued at $161.6 million.

According to a report by Reuters, the New York-based private equity and real estate firm sold a 40 percent stake, alongside hedge fund Elian Properties, in Hong Kong listed Evergrande’s Royal Scenic Peninsula housing development in Guangzhou, central China.

The asset was originally acquired by Merrill Lynch in 2007 before it merged with Bank of America and was transferred into its Asian Real Estate Opportunities Fund, which closed on $2.65 billion at the end of 2008.
It then came under the stewardship of Blackstone after the investors of the fund threatened litigation following various actions taken by the bank considered non-fiduciary, an episode that ultimately resulted in the handing over of the GP and management functions to Blackstone as well as a $650 million settlement for the investors at the end of 2010.

According to the Reuters report, Blackstone and Elian Properties are understood to have made back close to double their investments in the project in a sign that their management of the fund is already bearing fruit.
The sale follows that of Blackstone’s first direct investment in China, the Channel One shopping centre, to a subsidiary of Hong Kong-listed New World Development Co in a deal valued at about $228 million. The deal for that 452,000 square foot property which was bought in 2007 on behalf of Blackstone’s 2008, $10.9 billion Blackstone Real Estate Partners VI fund, completed in November.

The property was one of Evergrande’s largest developments and was one of the attractions that prompted hundreds of millions of dollars of capital and financing from international groups, including Merrill Lynch, prior to a planned public floatation in 2008. According to a report by the New York Times, the offering was killed by Chinese governmental efforts to control a housing bubble at the time.

Evergrande remains one of China’s preeminent developers with total assets of approximately $23.7 billion as of last summer and more than 30,000 staff. According to its website it is one of the 10 largest Chinese developers.