Currency Conversions Boost Holding Period's Return in Shanghai
Wall Street Journal reports: According to sources familiar with the matter, Hong Kong-based private real estate investment firm Asia Pacific Land will sell The Center, a 40-story high-quality office building in Shanghai, CHN, for ?4.4 billion yuan ($670 million) – the largest sale in mainland China yet this year. After having trouble refinancing a portion of the debt, Asia Pacific has been forced to market the building. However, while this sale price would represent a ?500 million yuan loss on an absolute basis from the ?4.9 billion yuan Asia Pacific paid for the property it paid in 2008, the firm will still realize a profit on the sale. The transaction will be completed offshore in Hong Kong in dollars, and thus the Chinese currency’s modest appreciation against the dollar over the past three years will allow for Asia Pacific to turn a small profit. The Wall Street Journal stated that, “…the yuan's appreciation certainly is good news for foreign investors who need to cash out their investments in China.”
The buyer is China Pacific Insurance Group, the largest insurance firm in the China. According to the Journal, “The deal also marks one of the first property purchases by a Chinese insurer since Beijing granted greater leeway last year for the country's insurance companies to invest in real estate.” The rise of insurance investors is in stark contrast with the rest of the Chinese market, which regulators have tried to suppress over the past year to preempt a pricing bubble. Citing data aggregated by Real Capital Analytics, the Journal stated that, “Total sales volume in Shanghai...totaled $3.9 billion last year, a 22% drop from 2009.”
View the full article on Wall Street Journal: Currency Conversions Boost Holding Period's Return in Shanghai
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Posted by: Nina Turner