Foreign Investment has started once again to pour into the Chinese commercial real estate market as Chinese developers are selling properties to survive a lag in cash flow, Beijing Business Today reported.

On Monday, US-based Pramerica Financial Group acquired a large shopping center development in Guangzhou for 2 billion yuan through a subsidiary after a year of negotiations.

According to sources, the Haizhu District property covers a land area of 100,000 square meters. The complex consists of a supermarket, a cinema, restaurants, and several dozen retail outlets. The property has inked lease letters of intent with many well-known brands for its retail space. The seller was a listed division of China Overseas Holdings Ltd. It was the first time for the city to see a commercial property project wholly acquired by a foreign company.

In late April, the Poly Real Estate Group also sold a Beijing property to Singapore's Capitaland for 2.3 billion yuan.

"China is going through the fast-paced progress of urbanization," said Michael Zhang, a DTZ's executive. "There are many opportunities, so the developers are looking at various projects and planning their strategies accordingly."

"The Government's home-purchasing restrictions caused problem of slow cash flow for Chinese developers," he added. "They have to sell commercial projects to get the cash, so that's why foreign funds have gotten in recently."

As residential property purchasing was restricted by the Chinese government last year, many developers have openly tried to transform into commercial property developers.

"However, the debt asset ratio of Chinese developers is so high, they cannot get money back since the money earned from commercial property can only flow back to them gradually, I believe many will go broke while they wait," another insider said.

According to Jones Lang LaSalle, a US-based real estate service firm, in 2011, trade deals involving Chinese mainland retail properties reached a new peak of 26.5 billion yuan. 90 percent of the investment was from Asian countries, especially Singapore, and domestic capitals.

"Foreign funds such as The Carlyle Group and Blackstone Group are all looking to find properties to invest in, and Chinese developers in second and third tier cities like Zhengzhou and Changchun want to sell [their properties] for cash," Zhang said.

Huge foreign funds usually appear at the Chinese market in the time of lowest prices and hardest restrictions. In 2009, the Chinese real estate market exploded. At that time, Goldman Sachs, SEB, J.P. Morgan, Carlyle, Citibank, and Lehman Brothers all sold their Chinese properties they bought at the lowest point in the market, and received more than 100 percent reward. The buyers were all Chinese. Now the cycle looks like it is going back again.

Contact the writer of this story at: zhangr@china.org.cn.

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