Blackstone sells property portfolio for $1.93bn

September 2016 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Private equity giant Blackstone Group LP has agreed to sell a property portfolio to China Vanke Co and a number of partners for around $1.9bn.

Vanke, the biggest publicly traded residential property developer in China, noted in a disclosure filing dated 18 July that it would be contributing $585m to the deal, without issuing any securities to raise the finance.

Vanke and its partners will acquire 96.55 percent of the assets, in a deal aimed at rapidly improving the company’s commercial property capabilities. A filing with the Hong Kong Stock Exchange did not disclose the names of the partners on the deal, or the names of the other selling parties or target companies.

“A wholly-owned subsidiary of the company has established a limited partnership fund… and the cooperation partners will acquire certain interests in the joint acquisition platform, which will in turn acquire 96.55 percent equity interests in the target companies,” said Vanke in the filing. “In order to rapidly enhance the company’s operation and management capability for commercial properties, the company, together with the cooperation partners… proposes to acquire the majority shareholding of certain commercial property companies…held by funds and other independent third parties,” the filing continued.

The likelihood of Vanke pursuing a deal being has been high for some time. In June, a company director abstained from a key vote citing a conflict of interest due to the impending transaction. It is believed that Vanke and Blackstone began negotiating the possibility of a deal in the early part of 2016. The company’s board of directors approved the transaction in June.

Blackstone’s main areas of operation in China are shopping malls and logistics and residential developments, but to date neither Vanke nor Blackstone have been willing to comment on the types of properties involved in the transaction. Vanke had disclosed that a potential deal with Blackstone was likely earlier in July.

Vanke is currently entangled in a high profile, controversial corporate tug of war. A battle between different major shareholder groups keen to take control of the company has been ongoing for some time. The deal with Blackstone has been a point of contention between Vanke and its second largest shareholder, China Resources (Holdings) Co.

Fearing a hostile takeover bid by its biggest shareholder, financial conglomerate Baoneng, Vanke’s management announced a $6.9bn deal with Shenzhen Metro Group in June. That deal, if completed, would dilute the holdings of Baoneng and China Resources considerably.

In June, Baoneng Group put forward a proposal to remove Vanke’s chairman Wang Shi and the rest of the company’s board, but the attempt was blocked by China Resources. China Resources recently increased its stake in Vanke and is continuing its attempt to wrest control of the company despite Vanke’s resistance.

For Blackstone, the deal is the second transaction worth more than $1bn in July alone. Affiliates of Blackstone Real Estate Partners VIII LP sold most of the medical real estate and life sciences assets of Wexford Science & Technology LLC for $1.5bn.

Blackstone has been particularly active in China of late, and over the years has carried out significant dealings with China Vanke. The two have been part of a joint venture which invested considerably in logistics, as well as bought into Szitic Commercial Property in Shenzhen, China, which manages more than 30 malls across the country. Blackstone’s website notes that the company’s malls “have continued to achieve compelling sales growth despite a slowdown in China’s overall GDP growth rate”.

Richard Summerfield