Private equity firm Carlyle Group has denied reports that it was selling its 110 villas in Minhang District of Shanghai to raise capital and said only a small proportion of the properties are being put on the block.
Through an announcement published on portal sina.com on Monday, Carlyle said reports that it was selling the villas at a loss were inaccurate and published without checking the veracity of the source. Carlyle stressed that it was satisfied with the villa investment and will continue to hold the property for a longer term.
In December 2006, Carlyle bagged 110 villas for US$120 million from the cash-strapped Shanghai CRED (China Real Estate Development Group) Real Estate Stock Co Ltd. At that time, market observers expected Carlyle to make considerable profits from the villa project. Carlyle refurbished nearly 40 villas and subsequently leased them out. Located near the annual Tennis Masters Cup venue of Qizhong Tennis Center, the villas are certain to make profits, said Fu Qi, a researcher with E-House China R&D Institute.
"China stopped allocating plots for villa development in 2003. So the villas have high market value," said Fu.
According to Regina Yang, head of research with property consultancy provider Knight Frank, even if Carlyle wants to sell some villas, that does not necessarily mean it would be at a loss.
"Broadly speaking, wholesale buyers enjoy a deep discount when buying property in bulk. In Carlyle's case, their spending for every sq m is less than 20,000 yuan, much lower than the reported 22,000 yuan bidding," said Yang, who also admitted that villa sales are not so rosy now and would not fetch as much profit as earlier.
Carlyle is not the only firm that is selling some of its prized Shanghai assets. Macquarie Group, Morgan Stanley and Hong Kong billionaire Li Ka-shing's Hutchison Whampoa are also planning similar moves.
"The worsening economic crisis is drying the property holders' credit, and to prevent from greater losses or even survive the financial tsunami, they have to sell," said Lu Qilin, vice-director of Shanghai-based Uwin Real Estate Research Center.
(China Daily March 4, 2009)
