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Presented by Simon Smith
China at Home, China Overseas, China in Australia
1
China at Home
2
The Golden Years - 80’s, 90’s, 2000’s
Source: National Bureau of Statistics
China’s GDP, 1978 - 2015
Reform and
opening (80’s)
Shenzhen
accord (90’s)
Join WTO
(2000s)
GFC
(2008)
3
Planes, trains and automobiles…
China has more than 150 cities with populations
of over one million (Australia has 5)
Railway passenger traffic stood at 215 million
people in March 2016
Air passenger traffic for February was 39 million
people
There were 2.05 million cars sold in March this
year
172 million passenger cars on the road at the
end of 2015 (Australia has 13 million)
4
Beijing Daxing International Airport
Beijing plans to build a new
international airport
• 2,680 hectares
• Seven runways (6 civilian)
• 75 million people per year by
2025
• Started Dec 2014; completion
2019
• Estimated cost: US$11.2 billion
• Designed by Zaha Hadid
5
FDI is still strong
Foreign direct investment, 1990 - 2014
6
Future growth rates will be lower
Source: National Bureau of Statistics, FocusEconomics
China GDP growth, 2000 – 2020F
Slowing economic growth
7
Growth rates are far from uniform
Source: National Bureau of Statistics 8
The tertiary sector is growing in
importance
Source: National Bureau of Statistics
Tertiary sector GDP contribution by region, 1978 - 2014
Slowing economic growth
9
China’s debt has reached developed
world levels
Source: Bank for International Settlements
Debt ratios, Sep 2015
Rising volume of debt and bad loans
10
Is the anti-corruption campaign effective?
Source: Transparency International
Corruption perceptions index, 2015
Rigid political system
11
Pollution is a major issue
Environment
12
China has been investing more
overseas since 2008
Source: United Nations Conference on Trade and Development
China FDI and ODI, 2000 - 2014
13
Outbound investment
Source: The American Enterprise Institute and The Heritage
Foundation
Outbound investment by industry*, 2015
*Include investments, construction contracts and trouble transactions14
China Overseas
15
Cross-border capital inflows and
outflows of Asia-Pac in 2015
Capital outflows from Asia Pac
US$58.5 billion
Net capital outflow from Asia Pac
US$35.5 billion
Source: Real Capital Analytics
Capital inflows to Asia Pac
US$23.0 billion
All analysis based on properties and portfolios US$2.5 million and greater. Not all
property deals are included in aggregate statistics (such as entity-level transactions).
Estimated prices are not posted, but are used in aggregate volume.16
Cross-border capital inflows and
outflows of Asia-Pac in the first quarter
of 2016*
Capital outflows from Asia Pac
US$16.1 billion
Net capital outflow from Asia Pac
US$14.2 billion
Source: Real Capital Analytics
Capital inflows to Asia Pac
US$1.9 billion
All analysis based on properties and portfolios US$2.5 million and greater. Not all
property deals are included in aggregate statistics (such as entity-level transactions).
Estimated prices are not posted, but are used in aggregate volume.
* 2016 data is preliminary
17
Global transaction volumes of
commercial properties, 2014 vs 2015
Source: Real Capital AnalyticsBased on independent reports of properties and portfolios $10 million and greater.
Data believed to be accurate but not guaranteed.18
Cross-border capital trends
2007 – Q1/2016*
Asia Pac experienced
a net inflow of capital
every year 2007-2011
For the first quarter of
2016*, RCA recorded
about US$14.2 billion
in capital outflows from
East to West
Source: Real Capital Analytics
Direction of cross-border capital inflows and outflows
Asia Pac, 2007 – Q1/2016*
All analysis based on properties and portfolios US$2.5 million and greater. Not all
property deals are included in aggregate statistics (such as entity-level transactions).
Estimated prices are not posted, but are used in aggregate volume.
* 2016 data is preliminary
19
Cross-border capital trends
2007 – Q1/2016*
Asia Pac has
experienced a net
inflow of capital every
year 2007-2011
For the first quarter of
2016*, RCA recorded
about US$14.2 billion
capital outflows from
the East to West in
total
Source: Real Capital Analytics
Direction of cross-border capital inflows and outflows
Asia Pac, 2007 – Q1/2016*
All analysis based on properties and portfolios US$2.5 million and greater. Not all
property deals are included in aggregate statistics (such as entity-level transactions).
Estimated prices are not posted, but are used in aggregate volume.
* 2016 data is preliminary
20
Real estate capital outflows from China
reached a new high in 2015
Source: Real Capital Analytics
Cross-border Capital Outflow from China, 2007 – Q1/2016*
All analysis based on properties and portfolios US$2.5 million and greater. Not all
property deals are included in aggregate statistics (such as entity-level transactions).
Estimated prices are not posted, but are used in aggregate volume.
* 2016 data is preliminary
21
savills.com.au
PRC Investor ProfileChinese Property Buyers
22
The real estate investor universe
Sovereign Wealth Funds
DevelopersBanks
Insurance
RE Funds / Trust Funds
State Owned Enterprises
Conglomerates
23
China investor profile – What do they
want?
Type of Investors Targets
Sovereign Wealth Funds- Portfolio / platform deals / co-investments- Strategically important asset classes / regions- Long term money
Conglomerates - Diverse appetite across regions and asset classes (RE and non-RE)
High Net Worth Individuals - Wealth security / citizenship / status / education / health
Developers
- Most aggressive Chinese buyer / branding- Development sites – preferably residential to sell back to Chinese individuals- Regions with large Chinese communities / educational resources -Gateway cities though expanding to more provincial locations-Riding the risk curve-Learning from partners and bringing them back to China
Insurance Companies- Initial stages but sizeable funds to allocate / building real estate teams- Trophy assets in core international cities / risk averse – initial investment for profile, subsequent
deals should be higher yielding > 5.5% NIY
State Own Enterprises- Strategic assets mostly energy, raw materials, technology- Owner occupation office assets / regional locations
Banks- Owner occupation office assets / financial centers- Naming & signage rights / competing with international peers
RE funds / Trust funds/REITs?- New to the game (both domestically and internationally)- In search of higher yielding assets. Smaller lump sums
Sovereign wealth funds
Source: Sovereign Wealth Fund Institute
Country Fund NameAUM
(US$ billion)
Norway Government Pension Fund – Global 825
UAE Abu Dhabi Investment Authority 773
China China Investment Corporation 747
Saudi Arabia SAMA Foreign Holdings 669
Kuwait Kuwait Investment Authority 592
China SAFE Investment Company 547
Hong KongHong Kong Monetary Authority Investment
Portfolio418
Singapore Government of Singapore Investment Corporation 344
Qatar Qatar Investment Authority 256
China National Social Security Fund 236
The top 10 sovereign wealth funds by AUM, December 2015
25
Celsius Portfolio 2015 Siemens Campus Bentall Centre
Location Various cities in Belgium and France Munich London
Date July 2015 March 2015 January 2015
Type Retail Office Shopping Mall
Transacted
PriceUS$1.4 billion US$470.2 million US$589 million
GFA (approx.)246,384 sq m /
2,652,051 sq ft371,254 sq m / 3,996,146 sq ft 53,883 sq m / 580,000 sq ft
Vendor CBRE Global Investors HIH JV RFR Holding Meyer Bergman
PurchaserChina Investment Corporation JV
AEW EuropePrudential JV Gingko Tree Investment Gingko Tree Investment
Significant investment transactions by
Chinese sovereign wealth funds
26
Top 10 Chinese conglomerates by
market cap, 2015
NameMarket Cap
(US$ billion)
Sales
(US$ billion)
China Communications Construction 41.2 58.5
China Railway Group 39.7 96.8
China State Construction Engineering 36.8 120.3
China Railway Construction 33.7 94.1
Dalian Wanda Commercial Properties 28.1 17.7
Poly Real Estate 19.6 17.6
Metallurgical Corp of China 15.8 34.1
Fosun International 14.6 10.0
BBMG Corp 8.6 6.5
Shanghai Construction 8.3 18.2
Source: Forbes 27
Structure of a conglomerate
Finance
Cultural
Wanda
plaza Hotels
Overseas
Department
stores
Life
insurance
Investment
companyInternet
finance
Sports
Tourism
Film
Childrens
entertainment
Art
collecting
Commercial
properties
28
30 South Colonnade Trinity Tower 850 Third Avenue
Location London London New York
Date April 2016 March 2016 March 2016
Type Office Office Office
Transacted
PriceUS$189 million US$418 million US$463 million
GFA (approx.) 18,157 sq m / 195,443 sq ft 53,831 sq m / 579,440 sq ft 57,011 sq m / 613,664 sq ft
Vendor KanAm Grund Group Land Securities Shorenstein Properties
Purchaser HNA GroupResolution Property PLC JV Fosun
International Limited
MHP RE Services JV
HNA Group
Significant investment transactions by
Chinese conglomerates
29
Top 10 Chinese SOEs by market cap,
2015
Name SectorMarket Cap
(US$ billion)
Sales
(US$ billion)
PetroChina Oil & Gas 334.6 333.4
ICBC Banking 278.3 166.8
China Mobile Telecommunications 271.5 104.1
China Construction Bank Banking 212.9 130.5
Bank of China Banking 199.1 120.3
Agricultural Bank of China Banking 189.9 129.2
China Life Insurance Insurance 160.5 71.4
Sinopec Oil & Gas 121.0 427.6
Bank of Communications Banking 71.2 53.6
China National Offshore Oil Corporation Oil & Gas 64.4 44.6
Source: Forbes 30
China’s largest companies are still SOEs
31
Aldgate Tower 194 Industrial Property Portfolio 99 Bishopsgate
Location London Various cities in US London
Transacted Date April 2016 November 2015 October 2015
Type Office Industrial Office
Sale Price US$496 million US$4.6 billion US$525 million
GFA /
No. of rooms29,450 sq m / 317,000 sq ft
5,333,256 sq m /
57,406,640 sq ft31,587 sq m / 340,000 sq ft
Vendor Molloy Properties Industrial Income Trust Brookfield Property Partners
PurchaserChina Life Asset Management JV
Brookfield Europe
Global Logistic Properties JV China
Life Insurance JV GLP US Income
Partners II JV GLP US Income Partners
II
China Life Insurance JV Qatar
Investment Authority
Significant investment transactions by
Chinese SOEs
Top 10 Chinese property developers
Name2014 Sales
(US$ billion)
Greenland Group 39.3
China Vanke 35.2
Dalian Wanda Commercial Properties 24.0
Poly Real Estate Group 22.4
Evergrande Real Estate Group 21.5
Country Garden Holdings 21.0
China Overseas Land & Investment 20.0
China Resources Land 11.8
Shimao Property Holdings 11.6
Greentown China Holdings 10.8
Source: Mingtiandi 33
The domestic land sales market has
been cooling over recent years
Source: Real Capital Analytics
Sales of development sites/land Sales of commercial assets, apartments & hotels
Based on independent reports of properties and portfolios $10 million and greater.
Data believed to be accurate but not guaranteed.34
The HeliconFormer Rivington Center for
Nursing & RehabilitationLudgate West
Location London New York London
Transacted Date February 2016 February 2016 December 2015
Type Office Senior Housing Office
Sale Price US$200 million US$116 million US$219 million
GFA /
No. of rooms12,077 sq m / 130,000 sq ft 206 units 12,077 sq m / 130,000 sq ft
VendorDeutsche Asset & Wealth
Management – GermanyThe Allure Group Al Akaria
PurchaserChina Overseas Land & Investment
Limited
China Vanke JV Slate Property Group
JV Adam America REPoly Real Estate Group
Significant investment transactions by
Chinese property developers
35
Top 10 Chinese banks by market cap,
2015
NameMarket Cap
(US$ billion)
Revenue
(US$ billion)
ICBC 278.3 166.8
China Construction Bank 212.9 130.5
Bank of China 199.1 120.3
Agricultural Bank of China 189.9 129.2
Bank of Communications 71.2 53.6
China Merchants Bank 64.0 45.5
Industrial Bank 57.9 39.4
China Minsheng Bank 51.7 40.0
China Citic Bank 49.7 38.3
Shanghai Pudong Development Bank 49.2 38.2
Source: Forbes 36
Top 10 global banks by market cap,
2015
Name CountryMarket Cap
(US$ billion)
Revenue
(US$ billion)
ICBC China 278.3 166.8
Wells Fargo United States 278.3 90.4
JP Morgan Chase & Co United States 225.5 97.8
China Construction Bank China 212.9 130.5
Bank of China China 199.1 120.3
Agricultural Bank of China China 189.9 129.2
HSBC Holdings United Kingdom 167.7 81.1
Bank of America United States 163.2 97
Citigroup United States 156.7 93.9
Commonwealth Bank Australia 117.1 39.6
Source: Forbes 37
31 Old Burlingston StreetBockenheimer Landstrasse
73-777 Bryant Park
Location London Frankfurt New York
Transacted Date January 2016 July 2015 May 2015
Type Office Office Office
Sale Price US$43.7 million Not disclosed US$600 million
GFA /
No. of rooms845 sq m / 8,449 sq ft 4,000 sq m / 43,056 sq ft 43,644 sq m / 470,000 sq ft
Vendor Ollerton Developments Frankfurt Union
Hines JV JP Morgan Asset
Management JV Pacolet Milliken
Enterprises Incorporated
Purchaser Baoshang Bank China Construction Bank Bank of China
Significant investment transactions by
Chinese banks
38
Top 10 Chinese life insurance
companies, 2015
NamePremium Income
(US$ billion)
China Life Insurance 56.1
Ping An Insurance 32.1
New China Life Insurance 17.2
China Pacific Insurance 16.7
The People’s Insurance Company of China 13.8
China Taiping Insurance 12.3
Sino Life Insurance 12.2
Taiking Life Insurance 11.7
Anbang Life Insurance 4.8
Sunshine Insurance 4.7
Source: China Insurance Regulatory Commission 39
Strategic Hotels &
Resorts
Bentall Centre
Tower I – IV101 Murray Street
Merrill Lynch
Financial CenterWaldorf Astoria
LocationVarious cities in
United StatesVancouver New York New York New York
Transacted Date March 2016 March 2016 July 2015 May 2015 February 2015
Type Hotel Office Residential Office Hotel
Sale Price US$6.5 billion US$714 million US$820 million US$414 million US$1.95 billion
GFA /
No. of rooms7,571 rooms
134,847 sq m /
1,451,484 sq ft
3,660 sq m /
39,401 sq ft
34,029 sq m /
366,285 sq ft1,425 rooms
Vendor Blackstone Ivanhoe Cambridge
Fisher Brothers JV
Witkoff JV Vector
Group
Blackstone Hilton Worldwide
PurchaserAnbang
Insurance Group
Anbang
Insurance GroupTaiping Life Insurance
Anbang
Insurance Group
Anbang
Insurance Group
Significant investment transactions by
Chinese insurance companies
40
Top 10 Chinese billionaires
Rank Name
Net worth
(Billion,
USD)
Source of
WealthRank Name
Net worth
(Billion,
USD)
Source of
Wealth
1Wang
Jianlin30.0
Real Estate,
Entertainment6 Robin Li 10.4 IT
2 Jack Ma 21.8 IT 7He
Xiangjian9.3
Home
appliances
3Ma
Huateng17.6
IT,
Entertainment8 Hui Ka Yan 8.7 Real Estate
4 Lei Jun 13.2Mobile Phones,
Investments9
Liu
Qiangdong7.8 IT
5Wang
Wenyin12.1
Mining, copper
products10
William
Ding7.5
Online
Games
Source: Forbes 41
Billionaires in China are rising in
prominence
Source: Forbes
2015 Forbes List of the World’s Billionaires
No of billionaires
United States 540
China (incl HK) 315 (64)
Germany 120
India 84
Russia 77
United Kingdom 50
Italy 43
France 38
Canada 33
Switzerland 32
Brazil 31
South Korea 31
Turkey 30
Japan 27
Sweden 26
Australia 25
42
Better quality of life outside China
Education Environment
Lifestyle Healthcare
43
Seeing the world
Source: Chinese National Tourism Administration, Savills Research
& Consultancy
Outbound mainland Chinese tourists, 2005 - 2015
44
Ownership restrictions
Country Players
Hong Kong- Residential property acquired by non-permanent Hong Kong resident or a company will be subject to
buyers’ stamp duty at 15% of transaction value
Japan - No restrictions on overseas ownership of land and buildings
Malaysia- General threshold price of residential property for overseas purchasers is RM1 million- Overseas purchasers required to obtain state government approval- Additional restrictions or levies may be imposed by certain states/areas, e.g. Johor, Penang, Selangor
Philippines- Overseas nationals are restricted from owning private land- Overseas ownership in condominium projects can be up to 40% of the entire project
Singapore
- Non-Singaporeans are required to apply to Minister of Law for approval to purchase landed residential properties in Singapore except for those located on Sentosa island
- Overseas individuals or companies have to obtain in-principle approval for the development of landed properties for sale
South Korea- In order to acquire real estate for profit (office buildings, factory sites, houses for rent, etc.), a foreign-
invested company must be registered under the Foreign Investment Promotion Act
Taiwan - Individuals or entities from mainland China are restricted from owning property unless it is for self use
Vietnam- Permanent overseas Vietnamese (considered to be foreigners) can own houses or apartments- Only selected foreigners can own maximum one apartment with 50-year leasehold ownership
45
China in Australia
46
Intra-Asia real estate investment has
seen steady growth
Source: Real Capital Analytics
Cross-border capital flows within Asia Pacific, 2007 – 2015
47
Hong Kong, Singapore and China are
the main investors within the region
Source: Real Capital Analytics
Ranking Origin of capital Destination of capitalTransacted volume
(US$ million)
1 Hong Kong China 31,702
2 China Australia 4,614
3 China Hong Kong 4,019
4 Singapore Australia 3,515
5 China Malaysia 2,518
6 Hong Kong Japan 1,823
7 Singapore China 1,555
8 Singapore New Zealand 1,049
9 China Singapore 1,035
10 Hong Kong Australia 997
Top ten intra-Asia Pacific cross-border capital flows, 2015
48
All analysis based on properties and portfolios US$2.5 million and greater. Not all
property deals are included in aggregate statistics (such as entity-level transactions).
Estimated prices are not posted, but are used in aggregate volume.
Fund raising activity has been fairly stable
over recent years
Real Estate Funds Raised for Asia Pac*, 2008 - 2015
49
Chinese investment into Australia
Source: The American Enterprise Institute and The Heritage Foundation
Outbound investment into Australia, 2005 - 2015
50
2015 Investments in Australia
Month Type InvestorQuantity in
MillionsShare Size Transaction Party Sector Subsector
January Investment Dalian Wanda $790 100%Gold Fields House and
Fairfax HouseReal estate Property
April Investment Fosun $490 75%Five Dock and Fortitude
ValleyReal estate Property
May InvestmentGuangdong Rising Asset
Management$950 100% Panaust Metals Copper
May Investment Shanghai Shenglong $140 -Citta Property Group and
SGH and Barana GroupReal estate Property
May Investment Shandong Bright Ruby $340 - Hilton Worldwide Tourism -
June Investment China Construction Bank $1,500 - Royal Bank of Scotland Finance Banking
June Investment Shanghai Greenland $130 - Iris Capital Real estate Property
July Investment CIC $1,790 - Morgan Stanley Real estate Property
September Investment Biostime $990 83% Swisse Wellness Agriculture -
September Investment Bright Foods $200 50% Silver Fern Farms Agriculture -
October Investment Moon Lake Investments $200 - Van Diemen Agriculture -
October Investment Shandong Delisi $100 45% Bindaree Agriculture -
October Investment Landbridge $370 - N/A Transport Shipping
November Investment Lenovo $490 8% Santos Energy -
December Investment Luye Group $690 100% Health Care Australia Technology Medical
December Investment China Power Investment $2,200 100% Pacific Hydro Energy Hydro
June ConstructionChina Communications
Construction$670 33% Samsung and ACS Transport Autos
October Construction Sinomach $140 - Donald Mineral Sands Metals -
MarchTroubled
TransactionsYanzhou Coal $350 - N/A Energy Coal
NovemberTroubled
TransactionsShanghai Pengxin $250 - S. Kidman Agriculture -
Source: The American Enterprise Institute and The Heritage
Foundation 51
Source: Savills Research
World cities CBD Grade A Effective Yields,
Dec 15
World cities CBD Grade A Effective Risk
Premium, Dec 15
52
Australia is attractive to overseas capital
Source: Real Capital Analytics
Cross-border real estate capital inflows and outflows, 2007 – 2015
53
Cross-border capital inflow to Australia,
2015
EMEA
US$1,495 millionAmerica
US$3,498 million
Asia Pac
US$10,040 million
Source: Real Capital Analytics All analysis based on properties and portfolios US$2.5 million and greater. Not all
property deals are included in aggregate statistics (such as entity-level transactions).
Estimated prices are not posted, but are used in aggregate volume.54
Asia Pacific countries cross-border
capital inflow to Australia, 2015
Source: Real Capital Analytics
China
US$4,614 million
Singapore
US$3,516 million
Hong Kong
US$997 million
All analysis based on properties and portfolios US$2.5 million and greater. Not all
property deals are included in aggregate statistics (such as entity-level transactions).
Estimated prices are not posted, but are used in aggregate volume.55
City investment and development
prospects in Asia Pacific, 2016
56
57
Disclaimer
The information presented in this seminar is of a general nature only and is not intended for
any particular individual. No consideration has been given to the individual investment
objectives, financial situation and particular needs of any person and investors should
independently assess whether the advice is appropriate to their own circumstances. Although
the information in this presentation is taken from sources considered to be reliable, Savills
(Aust) Pty Ltd, its directors, employees and consultants do not represent, warrant or
guarantee, expressly or impliedly, that the information is complete or accurate. Further we do
not accept any responsibility to inform you of any matter that subsequently comes to our
notice, that may affect the information disseminated in this presentation.
58
