Goldman Sachs is in talks to sell a residential property investment in Shanghai for more than US$300 million as it seeks to take profit in the mainland’s property market before expected policy risks emerge next year, say sources familiar with the decision.
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Goldman selling Shanghai block for US$300m
Firm seeks to take property profits
Peggy Sito
30 November 2009
Goldman Sachs is in talks to sell a residential property investment in Shanghai for more than US$300 million as it seeks to take profit in the mainland’s property market before expected policy risks emerge next year, say sources familiar with the decision.
Goldman, which bought Garden Plaza from Japanese developer Daito Trust Construction for 1.43 billion yuan (HK$1.62 billion) in 2007, declined to comment.
The development is on Hong Qiao Road in Changning district and comprises 53 villas and 511 apartments. The total gross floor area is 97,227 square metres, comprising 87,385 sq metres of residential space and 2,370 sq metres of non-residential space including indoor and outdoor swimming pools, a golf driving range and other recreational areas.
“The property has a stable rental income and has attracted interest from a number of mainland developers and foreign funds,” a source said.
Shimao Property Holdings is among the developers that have shown an interest in the property, according to another source familiar with the matter. The Shanghai-based company, in a venture with United States fund Och-Ziff Capital Management Group, had offered an initial bid of about US$315 million.
“But the negotiations recently ended without agreement as the developer wanted to have a longer period of time to consider the matter before closing the deal,” said the source, adding that Goldman was now talking to other parties.
Because of its Japanese background, most of the tenants in the development are employees of leading Japanese firms including Sony Corp, Mizuho Corporate Bank, Bank of Tokyo-Mitsubishi UFJ and Mitsui Group. Average monthly rentals are about 160 yuan per square metre.
Shanghai’s residential leasing and sales markets have been growing this year. Property consultancy Savills said in its latest research report that luxury apartment rents increased by 0.4 per cent in the third quarter to an average 252.30 yuan per square metre per month, while the citywide luxury apartment occupancy rate fell by 0.6 percentage point to 75.4 per cent.
Luxury villa rents rose 2.2 per cent to an average 165.40 yuan per square metre per month, while the citywide luxury villa occupancy rate climbed 0.3 percentage point to 94.3 per cent.
In the sales market, the average transaction price in Shanghai maintained growth at 9.5 per cent in the third quarter to 13,404 yuan per square metre, but that was slower than the 23.2 per cent in the previous quarter.
Fears that the central government might withdraw part of its stimulus package - including mortgage discounts and a lower deeds tax - by the end of this year could lead to a nationwide slowdown, analysts said.
“The robust performance of the market was largely fuelled by a series of supportive policies, ample liquidity and shortage in supply. Both sales volume and selling prices have exceeded even the 2007 peak levels, and demand for investment purposes has gained stronger momentum,” said UBS analyst Eric Wong.
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