Carlyle Group in advanced talks to take stakes in China shopping malls

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Global private equity firm Carlyle Group is in advanced talks with China Vanke Co, the country’s largest property developer, to buy stakes in nine of its shopping malls, sources said.

One said the deal was valued at between 6 and 7 billion yuan (£776.37m to £0.90bn), while another said it could be worth up to 10 billion yuan.

A non-binding memorandum of understanding could be signed as early as tomorrow. .

Both Carlyle and Vanke declined to comment. The deal would give Carlyle access to China’s commercial real estate market where properties carry yields of around 4.5 to 6 per cent.

Rental margins of commercial properties are at around 60-80 per cent, higher than the 30-50 per cent of residential projects.

Vanke would also benefit from the deal, which would help it quickly generate returns as a slump in the residential market, and a slowing economy, tightens liquidity for Chinese develop- ers.

China Resources Land, another big property developer, has also said it was looking into financial tools such as real estate investment trusts and property funds to generate cash.

“Relying solely on cash contribution from residential projects is difficult to support a further and faster development of our commercial projects,” China Resources Land chairman Xiangdong Wu said.

Private equity firms can provide capital through financing or structure investment funds with developers, but some companies have also acquired whole buildings or taken equity stakes in developers.