China Vanke Co., a major residential developer in the People's Republic, has agreed through its Vanke Service unit to buy a 4.9% stake in real estate services giant Cushman & Wakefield ahead of that company's initial public offering. Once the sale is finalized, Vanke's holdings would be as much as 10.6 million shares.
The deal illustrates that while Chinese investors might be drawing back from outright ownership of U.S. CRE, they don't intend to back out of the global market for real estate services. After the deal is done, according to Cushman & Wakefield, the two companies will discuss as-yet-unspecified business opportunities in or near China.
Shenzhen-based Vanke, which was founded in 1984, develops and manages residential properties in more than 60 Chinese cities, and also has holdings in the United States, Hong Kong, the U.K. and Malaysia. As of 2017, the company ranked 307 on the Fortune Global 500.
Vanke's U.S. holdings, through Vanke US, focus on mid-market commercial and residential assets in gateway cities, especially New York and San Francisco.
The success or failure of the Cushman & Wakefield IPO will likely reflect on how investors feel about the health of the economy, because the well-being of real estate companies tends to be tied closely to the overall economy, the Wall Street Journal reports.
Cushman & Wakefield filed for its IPO in June, and set the terms Monday. The company is seeking to raise at least $719M through the sale of 45 million shares priced at $16 to $18 each. Such a valuation would put Vanke's investment at about $166.7M.
More than half of the IPO proceeds are expected to go toward paying down the brokerage's debts, which are considerable. According to the company's IPO filing, it is carrying about $3B in debt.
Cushman & Wakefield is expected to post a net loss of about $124M for the first half of 2018, the company said in the filing. Though a loss, that is an improvement compared with the first half of 2017, when the company lost $167M.
A private-equity consortium led by TPG Capital has owned Cushman & Wakefield since 2014, when TPG bought it and merged it with DTZ. After the IPO, the current owners will retain voting control of the company.
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