The world may be repricing around us, but for private equity real estate firms in the midst of closing a deal that actually may be a good thing. It certainly was for The Blackstone Group.
In June, the New York-based firm agreed to buy a 90 percent stake of the Shanghai centre, Changshou Commercial Plaza, for RMB625.5 million (roughly $90 million; €70 million). That of course was in the summer.
Come November, and the global property markets – including China's – looked somewhat different. Even in emerging markets, with their strong long-term growth stories, real estate valuations were being hit by the credit crunch.
For Blackstone, it offered the opportunity to renegotiate the Changshou deal. Instead of paying Hong Kong-based financial services firm, VXL Capital, RMB625.5 million cash for a 90 percent stake in the company that ran the centre, Blackstone was able to close the deal for RMB536.7 million ($78 million; €60.2 million) cash for a 95 percent stake.
The six storey centre houses a 25,312-square-metre shopping mall and commercial complex and is located in Shanghai's Putup district.
Blackstone declined to comment on the deal but according to people familiar with the matter the renegotiation was also triggered by changes to the minimum lettable area of the centre and the number of car parking spaces, as well as to changing market conditions.
The short-term volatility being seen in China at the moment,
Blackstone – which recently saw the Chinese sovereign wealth fund China Investment Corporation increase its stake in the firm to 12.5 percent from 9.9 percent – has already stressed the importance of China to its real estate strategy, after opening an office in Beijing from which to drive investments in the mainland.
Senior managing director Garrett Moran told the