BlackRock fund gives up China towers after opting to miss loan
Institutional investors are offloading distressed commercial real estate from Shanghai to Hong Kong amid weak demand
A BLACKROCK fund forfeited a Shanghai office complex to Standard Chartered after it did not make a loan payment for the property, according to sources familiar with the matter.
A fund unit of the New York-based asset manager opted not to make a payment for a syndicated loan led by Standard Chartered due at the end of September, said the sources, who asked not to be identified because the information is private.
BlackRock’s fund took out the loan of about 780 million yuan (S$144 million) for two towers it bought in 2018 at Waterfront Place in China’s financial hub, the sources added.
It’s the latest sign that China’s yearslong property downturn has swept up even the world’s largest financial institutions. The development came as BlackRock failed to sell the property even after offering a 30 per cent discount to its purchase price, according to the sources.
The lenders already rolled over the loan for one-year when it matured in 2023, and declined to extend it for a second time, the sources said.
The US investment firm bought the properties from PGIM Real Estate for 1.2 billion yuan in 2018, Mingtiandi reported at the time. The property is under a fund managed by BlackRock’s real estate team and occupies a total office space of 27,805 square metres (299,290 square feet) in Chang Feng, a business district.
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BlackRock did not respond to a request for comment. A Standard Chartered spokesperson declined to comment.
China’s biggest cities are seeing a growing array of gleaming skyscrapers that are barely half-full, triggering rent cuts and a slump in value as the world’s second-largest economy slows. Institutional investors are offloading distressed commercial real estate from Shanghai to Hong Kong amid weak demand and as part of a global trend to reduce exposure to everything from offices to shopping malls.
Shanghai office vacancies climbed to 21.5 per cent in the third quarter of 2024, the highest in about two decades, according to CBRE Group. They risk rising further this year on a supply pipeline that’s set to be the highest in five years.
BlackRock invested in commercial real estate projects in China about a decade ago when it sought more exposure to offices and malls in first-tier and second-tier cities. In 2017, it purchased an office tower in the city centre for 1.37 billion yuan, Mingtiandi reported at the time.
Yet China’s property crisis since 2021 has caught many investors off guard including global banks such as HSBC Holdings and Standard Chartered, which have set aside hundreds of millions of US dollars of provisions against commercial real estate portfolios on the mainland. BLOOMBERG
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