News & Analysis

CIC, Blackstone unveiled as Greentown investors

Sovereign wealth fund China Investment Corporation and private equity firm the Blackstone Group have emerged as the investors in a joint venture with troubled property developer Greentown China, according to a source close to the matter.

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The Blackstone Group has teamed up with the China Investment Corporation (CIC) to engage in joint property development in China, according to a source close to the firm. The joint venture is with indebted developer Greentown China and one of its subsidiaries, Greentown Sunshine Investment.

CIC, via its own subsidiary, will be committing RMB 1.2 billion (€140 million; $188 million) to the joint venture and Blackstone RMB 200 million. Greentown and Greentown Sunshine Investment are providing RMB 480 million and RMB 120 million respectively.
 
CIC’s subsidiary, China Jianyin Investment Securities, will invest domestically on behalf of the sovereign wealth fund taking a 60 percent stake in the venture and Blackstone a 10 percent stake. Blackstone declined to comment on the deal and CIC was unavailable before press time.
 
CIC has used a subsidiary for the deal because it is not typically permitted to transact on the mainland. The venture was reportedly only approved because it is not conventional development, but will focus on holiday and retirement homes and infrastructure.

Although the deal took place over the summer, investors CIC and Blackstone have only just been disclosed as part of the deal. In June, Greentown said in a statement that it had formed a joint venture with “JV Partner A” and “JV Partner B”.

Greentown is known to have the worst credit risk score of all Chinese developers, scoring one out of 100 in a StarMine report. The company is to sell off some of its developments to pay down its debt.

CIC has also hit headlines recently showing interest in infrastructure in developed economies like the UK. In an opinion article in the Financial Times this week, head of the China Investment Corporation, Lou Jiwei, wrote: “Infrastructure in Europe and the US badly needs more investment. Traditionally, Chinese involvement in overseas infrastructure projects has just been as contractors. Now Chinese investors also see a need to invest in, develop and operate projects.”

With ample cash available, Chinese investment firms seem well-positioned to take advantage of opportunities in the distressed economies of the US and Western Europe.