05 Nov 2015 | The Australian | Samantha Hutchinson
One of China's biggest property developers, Country Garden, has thrown the door open to expanding its Australian portfolio in conjunction with China's second largest insurer, Ping An Insurance.
The Guangzhou-based developer, controlled by one of China's wealthiest women, Yang Huiyan, is chasing opportunities offshore and will target Australia, where it already has a $500 million project under way in Sydney.
Country Garden in April sealed a deal with the insurer giving it access to more than 50 billion yuan ($10bn) from Ping An, in addition to access to the sales services of Ping An's 830,000 sales agents who now sell and market Country Garden properties across China.
With Chinese regulatory authorities giving the go ahead for the cashed-up insurers to head offshore, Ping An has already emerged as a player in the Australian real estate market.
The Chinese insurer has teamed up with Mirvac Group on a unit development in inner Sydney and has bid on major office towers, though it is yet to land a deal.
Ping An's buying is part of a wave of investment by Chinese insurers that is shifting property markets globally and it recently struck a $US600 million deal with a Denver-based property fund, Blumberg Investment Partners, to invest in the US. It also owns a London office tower.
Following the tie-up in April, the Chinese pair are expected to grow locally and broaden their search for Australian property. Profit margins on Chinese residential developments are falling, according to Country Garden's chief financial officer Wu Jian Bin, forcing Chinese developers to pursue new development opportunities in Australia, and further afield in Canada, the US, Indonesia and Malaysia. After 20 years of development in China's property market, the whole sector, the gross profit margin has actually decreased from the peak to its current of 20-something per cent, and we're looking for other countries and markets that can offer us higher margins," Mr Wu told The Australian.
"As far as we are aware, Ping An indicated to us that they have a plan this year... they are actually targeting to acquire around 70 office buildings around the globe... If we consider both at the shareholder level and at the operations level, you can see that Ping An is a very strategic partner for future development."
Ping An already provides Country Garden with financing, sales support through an online web portal targeted at customers and lending for home buyers coupled with insurance. It is understood the two groups could broaden this relationship to property development in the near term, with Country Garden capitalising on its scope of development experience across all property types.
A residential developer in Australia, Country Garden is better known in China and Malaysia as an integrated developer more experienced in developing cities with a mix of residential development and other sectors including retail, hotels and resorts, entertainment, office and educational facilities.
Ping An has furnished the developer with a financing facility of 50 billion yuan, of which Country Garden has only used 10 billion yuan. And while Malaysia's 40 billion yuan Forest City precinct on a string of reclaimed islands between Johor Bahur and the Singaporean coast is likely to hold the group's focus for some time, Mr Wu is adamant the hunt is still on for property in other locations.
Property markets in Canada and North America look attractive to the country, Mr Wu said, in addition to Indonesia and Australia, where the company is still actively scouting for new sites. Country Garden has knocked back more than seven deals in Sydney during the year, Mr Wu said, adding that more and more local developers were approaching Chinese developers for quick site sales as construction finance became more difficult to obtain. "It makes us a bit suspicious," Mr Wu said, adding that the group was more confident of stable demand for its sites because its buyers were buying the apartments as homes for the future, rather than investment properties for perpetuity.
Samantha Hutchinson travelled to China as a guest of Country Garden.