Brokerage Buys Into Chinese Real Estate JV

Merrill Lynch & Co. Announced today that it will invest $30 million in a Chinese real estate project. Merrill will act as a joint venture partner in a mixed-use real estate project to be developed in Beijing. The project will house the Park Hyatt Hotel plus more than 200 private residences. Other uses are also planned for the complex, according to the brokerage.

This is the first time that Merrill Lynch has made a direct investment in Chinese real estate. Other brokerages such as Morgan Stanley have already entered this property market through similar joint ventures. Merrill’s local partner in China is Beijing Yintai Property Company.

Like other brokerages with property stakes on the Chinese mainland, Merrill moved cautiously in establishing this venture. The brokerage reportedly spent more than 12 months in discussions with Beijing Yintai Property Co. before agreeing to the deal.

Some investors and analysts fear that the Chinese property market is experiencing a bubble as property values rise dramatically. The Chinese economy is indeed strong: gross domestic product (GDP) in 2004 rose by 9.5%. The fear, however, is that China’s economy is overheating which could lead to overbuilding in the real estate market.

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