By Stephen Aldred and Donny Kwok
HONG KONG (Reuters) - Blackstone Group LP (NYS:BX) agreed to pay about $400 million (251 million pounds) for a stake in Chinese shopping mall group SCP Co Ltd, a source with direct knowledge of the deal said, marking the U.S. private equity firm's largest investment in shopping malls in Asia.
China's banks are facing increased regulatory scrutiny on their lending criteria, putting pressure on small and mid-sized real estate firms to tap alternate funding sources. That is creating opportunities for private equity firms to invest in China's property sector, where they see strong growth potential.
Blackstone is buying a 40 percent stake in Shenzhen-based SCP, while ICBC International Holdings, a unit of Industrial and Commercial Bank of China Ltd <601398.SS>, is acquiring a 6 percent share, SCP said in a statement on Monday, without disclosing any financial details.
The source declined to be identified as the financial details of Blackstone's stake was confidential.
The Blackstone deal would take private equity investments in China's real estate sector to about $1.2 billion, 53 percent more than last year's total, according to Thomson Reuters data.
"Urbanisation, rising wages and an emerging middle class are all intact and will continue to grow over the medium term, and that will be supportive of not just the mall sector, but other real estate asset classes as well," said Christopher Heady, Blackstone's Hong Kong-based head of Asia real estate.
Heady emphasized that SCP's malls tap China's growing middle class consumers, rather than buyers of luxury brands.
SCP will hold assets totalling in excess of $2 billion after the deal, according to the company.
Unlisted SCP currently manages 19 shopping malls, with tenants including Wal-Mart Stores Inc (NYS:WMT), Uniqlo and Chow Tai Fook Jewellery Group Ltd (1929.HK). It has also partnered with Carlyle Group (CG.O), Morgan Stanley (NYS:MS) and China Resources Vanguard on separate projects.
Blackstone is the world's biggest private equity real estate firm with $69 billion in assets under management. It invests in Asia from a $13.3 billion global real estate fund. But the bulk of the SCP investment will come out of its first Asia real estate fund, targeted to raise up to $4 billion.
In August, Blackstone's real estate arm offered to buy Hong Kong-listed construction firm Tysan Holdings Limited <0687.HK> for $322.6 million.
New York-headquartered Blackstone, founded in 1985, had $248 billion in total assets under management at the end of September, up 21 percent year on year.
Blackstone's real estate holdings account for 65 percent of its latest earnings, while private equity contributed 13 percent.
(Reporting by Stephen Aldred and Donny Kwok; Editing by Denny Thomas and Ryan Woo)