E-House, Blackstone Moves Auger Real Estate Rebound 中国房地产市场可能接近底部

By newsdoug on November 29, 2011

New signs show real estate downturn near bottom There’s a couple of interesting news bits coming from the struggling real estate sector, which indicate its current downturn could be nearing a bottom and that better days may be on the horizon in the next year or two. One of those bits is seeing E-House (NYSE: EJ), one of China’s top real estate services providers, taking control of the China franchise of major US home seller Century 21 (NYSE: CTC); while the other is seeing several major players, including Blackstone (NYSE: BX) and China’s sovereign wealth fund, setting up a real estate financing joint venture. Let’s start with the E-House deal, which is seeing the Chinese firm take a 58 percent stake in Century 21 China for a relatively modest $25 million. This deal is clearly being driven by a weak real estate market that has seen transaction volumes plummet as China takes steps to cool the market, driving E-House into the red in its latest quarter (company announcement) and leaving transaction-driven brokerages like Century 21 also struggling. This deal comes as E-House attempts to buy out China Real Estate Investment Corp (Nasdaq: CRIC), its joint venture with Sina (Nasdaq: SINA) (company announcement), and is the latest sign of consolidation as the real estate services industry struggles for survival. The moves look like good ones for E-House, and should leave it well positioned to be a true industry leader when the current downturn ends. The second news bit is seeing Blackstone, China Investment Corp (CIC) and domestic real estate developer Greentown (HKEx: 3900) in talks to set up a real estate finance joint venture with 2 billion yuan, or about $300 million, in registered capital, with CIC holding 60 percent. (English article) Establishment of this venture is yet another sign that the big players like CIC and Blackstone see the current downturn ending in the next 1-2 years, as that’s the earliest we might see any of their new projects come to market. With many of the country’s real estate developers now facing a cash crunch in the current downturn, demand should be strong for this kind of financing in the next 1-2 years, boding well for the venture.

Bottom line: A big acquisition by E-House and a major new real estate financing joint venture are signs that China’s real estate downturn is near bottom.

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