Property developers raising cash abroad

China Daily, February 17, 2011

"We proactively did promotions during the holidays, but February's sales are still likely to drop sharply from January," said Tan Huajie, the board secretary of Vanke Co Ltd. The Shenzhen-based Vanke, China's largest property developer, saw its revenue rise 221 percent last month from a year earlier, making it the nation's first residential property developer with monthly sales in excess of 20 billion yuan, But those sales came before the government extended property curbs to rein rising housing prices.

Last month, China raised the minimum down payment for second-home purchases, told local governments to set price targets on new properties, and introduced taxes for residential properties in Shanghai and Chongqing. The central bank also raised interest rates last week for the third time since mid-October.

"While residential real estate prices have yet to go down in response to any of the government's efforts to date, the increasing number of measures being employed can be expected to reduce investor confidence in the near term. The primary consequence of this will most likely be a rapid decrease in the number of new transactions taking place," said Michael Cole, research director of Colliers East China.

According to Wang Gehong, president of Beijing Grand China Real Estate Fund, the cash flow of many smaller property developers has greatly deteriorated in the past few months.

"Now we receive many projects from banks as they further strengthen risk management over the real estate sector," said Wang

While Chinese property developers seek overseas capital, the world's leading private equity firms and real estate funds have also kicked off a new round of fundraising.

During an earnings call with investors on Feb 3, Blackstone Group president and chief operating officer Tony James said the firm would begin fundraising for Blackstone Real Estate Partners (BREP) VII on a scale similar to BREP VI, which raised $10.9 billion.