BlackRock's forfeited towers in Shanghai to be sold at 40pc discount

A China office complex previously owned by a BlackRock fund is close to being sold at a discount of more than 40 percent in a deal that would lead to losses for the US asset manager and banks backing it, according to people familiar with the matter.

Since BlackRock's fund opted to skip payments on a syndicated loan and forfeited the property to lenders led by Standard Chartered (2888), the London-based bank has been looking for buyers, the people said.

Standard Chartered is now in advanced talks to offload the two office towers at Shanghai's Waterfront Place business zone to DCL Investments, a Chinese distressed situation specialist, for about 700 million yuan (HK$751 million), the people said.

That compares with 1.2 billion yuan BlackRock paid in 2018.

It also implies a more than 10 percent loss for banks, which provided a 780 million yuan loan, the people added.

The potential transaction shows how local investors are scooping up bargains amid the unprecedented property downturn in China, while foreign funds and companies pare exposure. DCL has been looking for distressed offices in Shanghai, the people said.

China's property crisis has caught many investors off guard including global banks HSBC (0005) and Standard Chartered, which have set aside hundreds of millions of dollars of provisions against commercial real estate portfolios on the mainland.

Prime office values tumbled about 30 percent from their pre-Covid high in some of the nation's major cities including Shanghai last year, according to Colliers International. Price pressure will likely linger in the near future, according to Cushman & Wakefield.

Bloomberg