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(Bloomberg) -- A China office complex previously owned by a BlackRock Inc. fund is close to being sold at a discount of more than 40% in a deal that would lead to losses for the US asset manager and banks backing it, according to people familiar with the matter.
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Since BlackRock’s fund opted to skip payments on a syndicated loan and forfeited the property to lenders led by Standard Chartered Plc, the London-based bank has been looking for buyers, the people said, asking not to be named because the discussions are private.
Standard Chartered is now in advanced talks to offload the two office towers at Shanghai’s Waterfront Place business zone to DCL Investments Co., a Chinese distressed situation specialist, for about 700 million yuan ($97 million), the people said. That compares with 1.2 billion yuan BlackRock paid in 2018.
It also implies a more than 10% loss for banks, which provided a 780 million yuan loan, the people added.
Representatives for BlackRock and Standard Chartered declined to comment. DCL didn’t respond to a request for comment.
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 Holdings Plc and Standard Chartered, which have set aside hundreds of millions of dollars of provisions against commercial real estate portfolios on the mainland.
China’s biggest cities are seeing a growing number of office buildings that are barely half-full, triggering rent cuts and slumping values as the world’s second-largest economy slows.
Prime office values tumbled about 30% from their pre-Covid high in some of the nation’s major cities including Shanghai last year, according to Colliers International Group Inc. Price pressure will likely linger in the near future, according to Cushman & Wakefield Plc.
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