New York-based BlackRock Inc. is set to expand its real estate portfolio through investment opportunities the company sees in China's property market.
A senior executive from BlackRock made the announcement Monday, September 7, reports Reuters. The company representative said that the firm found several good entry points into the country's real estate market, following the weakness in China's economy and credit environment.
John Saunders, who is the Head of Asia-Pacific Real Estate at BlackRock, told Reuters that the company plans to target mass-affluent shopping malls, along with grades "A" and "B" offices in select cities in China. Saunders added that BlackRock previously had very few investments in China given that the "pricing didn't seem conducive for us to make returns." However, he said that China has become a "key market" for the BlackRock since then. Saunders added, "We see the current malaise as a good entry point that we believe will throw up some good opportunities... It [China market] has been softening for the past 18 to 24 months."
Currently, the New York firm owns a shopping mall in the southwestern city of Chengdu, shared Saunders. The BlackRock executive also said that yields are "holding up relatively well" despite the weakened capital values.
Aside from retail and office real estate, Saunders also told Reuters that the company is eyeing opportunities in China's distressed residential projects in the mainland.
Meanwhile, the firm has also secured an additional $400 million quota to invest in China's market, reports Channel News Asia. The approval given by China's State Administrator of Foreign Exchange is reportedly one of the largest one-time approvals granted by local authorities. The additional quota would take the Qualified Foreign Institutional Investor (QFII) quota available to $1.25 billion. According to BlackRock, the $1.25 billion QFII quota is separate from the $640 million that was set under the Renminbi Qualified Foreign Institutional Investor schemes (RQFII).
The Channel News Asia report explained that the two schemes, namely the Qualified Foreign Institutional Investor and the Renminbi Qualified Foreign Institutional Investor, represents China's programs to allow foreign investors to invest in the nation's largely closed stock and bond markets. The increased QFII quota also comes at a time when the China stock market has seen a large amount of selling transactions. This reportedly resulted to the China government "stepping in" to boost investor confidence.
