Chinese residential developer Country Garden has made its UK debut by buying a £400m scheme in east London from Lindhill and Galliard.
Country Garden has led a consortium of investors, including a Hong Kong-based fund, that has bought the 785-home Ailsa Wharf development on Bow Creek after months of speculation and rumour about its UK entrance and despite Chinese government limits on capital outflows.
Hong Kong-listed Country Garden, which is based in Foshan, China, has grown to be the world’s largest residential development company since its establishment in 1992.
Last year it achieved contracted sales of RMB550.8bn (£62.3bn), and profits of RMB58.79bn. In mainland China it has 1,468 active projects in 768 towns, 220 cities and 30 provinces.
By comparison Barratt, the UK’s largest housebuilder, had £2.7bn of contracted sales and profit of £765m in its annual results to June 2017, making it roughly a 23rd the size of Country Garden.
Country Garden’s overseas expansion has so far been limited to Malaysia and Australia, despite the company looking at a UK push since 2016, when it signed a memorandum of understanding with Birmingham City Council to examine opportunities.
Since then it had bid on a number of sites and held discussions with senior figures in the residential market over recruitment but it has not until now made an acquisition nor recruited anyone from the UK. It is establishing a UK team that will be headed by a Country Garden employee from China.
Its debut UK investment on the Bow Creek in London’s post-industrial East End is a marked difference from high-profile prime acquisitions by its compatriots such as R&F Properties and Dalian Wanda Group.
Values in the area are considerably lower than in places such as Nine Elms and make for lower-profile but more affordable schemes that could be considered preferable in the under-pressure London residential market.
Flurry of activity
A flurry of recent activity along the creek has taken place recently, with British Land submitting planning for 670 homes on the Tesco site in Bromley by Bow, alongside another 400 homes from Lindhill, and 491 from Palmer Capital. Berkeley is planning 3,800 homes at nearby Stephenson Street.
James Barton, city and east residential development partner at Knight Frank, says the creek has traditionally been a “forgotten pocket” of London, but is now generating more interest.
“The relative affordability of the area makes it a considerably different investment proposition to more established, higher-value areas in west or central London. Bow Creek could have significant potential for growth as the city’s focus continues to shift east,” he said.
Galliard and Lindhill assembled the 6.2-acre Ailsa Wharf site from a number of different land owners and received planning for the scheme at the end of last year. It will provide 548 private apartments, 233 social homes and four houses alongside more than 30,000 sq ft of commercial space across 13 buildings of between three and 17 storeys.
The deal comes as some Chinese companies reduce their holdings in the UK in response to regulation and checks at home. But others, such as R&F and CC Land, continue to snap up sites.
Much of the regulation imposed by the Chinese government had been directed at companies deemed to have taken on high levels of gearing towards amidst irresponsible overseas investment, alongside fears of a capital flight from China.
Last September, however, just weeks after new Chinese government restrictions came into force, Country Garden bought a 60% share in a Hong Kong project for HK$2.44bn (£221m) and the firm has been looking at other Australian schemes. In January 2018 it announced a HK$3bn share issue to help it cut its debt.
The Yang family
Established in Shunde, Guangdong, in 1992 by Yeung Kwok Keung – also known as Yang Guoqiang – Country Garden was listed on the Hong Kong Stock Exchange in 2007. At the time Yang transferred the majority of his shares to his daughter, Yang Huiyan.
Guoqiang remains as executive director and vice chairman, while Huiyan is executive director and vice chairman, holding 57% of the company’s stock.
As a result, the 36-year old is number six on the Forbes China rich list and the richest woman in Asia, with a “real time net worth of $26.6bn” (£20bn).