News analysis: Blackstone breaks ground in China resi debut

The New York-based private equity and real estate giant's joint venture with residential developer Great Eagle has broken ground on its first residential development in China. In doing so, Blackstone gains exposure to one of China's most prosperous regions.

Blackstone has just broken gorund in China’s port city of Dalian – home to its first investment in the country’s residential development market.

The New York-based private equity and real estate giant wants to develop more than 1,000 high-end apartments through with the Hong Kong-based real estate group, Great Eagle and PERE understands the partners have just completed excavation works on the development.

The firm purchased the site for approximately $100 million last year out of its latest global private equity real estate fund, the $10.9 billion, Blackstone Real Estate Partners IV, which closed in 2008. 

Residential property values in China have enjoyed extraordinary rises over recent years, particularly in more affluent areas of the county such as Dalian. The steep increases have even led to fears of a bubble, and government measures to head one off.

Measures taken to date appear to have been successful, however the country’s growth and urbanisation trends continue to attract private equity real estate investment. Other platforms with China residential strategies include Aetos Capital and AXA Real Estate Investment Managers.

Blackstone’s investment in Dalian, the sub-provincial city in the eastern Liaoning province of Northeast Chian, for its debut residential investments means it will gain exposure to a city which has benefited economically from its close proximity to oil refineries among other businesses. 

The former Japanese-occupied city, one of China’s most industrially developed urbanisations with a population of more than six million, has seen GDP growth of 10 percent or more since 1992. Last year GDP growth was 15 percent, making it one of the most prosperous regions in the country.

Founded in 1963, Great Eagle is one of Hong Kong’s best known real estate companies. The business invests across the real estate asset classes, including hotels, and in geographies including Asia, North America and Europe. Other investments made by Great Eagle include a 50.91 percent stake in Champion Real Estate Investment Trust, the owner of more than 1.5 million square feet of Hong Kong’s Citibank Plaza, the office tower and shopping centre of Langham Place, also in Hong Kong, and in more than 534,000 square feet of retail space in the US.

The firm, listed on the Hong Kong stock exchange, made a core profit after tax of approximately HK$1,276 million (€129 million; $164 million) in the financial year 2009 and had a net asset value of approximately HK 22 billion as of 31 December 2009, according to its website.