Ascendas-Singbridge has purchased an office tower near Shanghai’s People’s Square from US real estate private equity firm AEW, as the Singaporean player seeks to expand its mainland portfolio.
The developer jointly owned by Singapore’s Temasek Holdings and JTC Corporation purchased 686 Jiujiang Road, a fourteen-storey office tower in Shanghai’s Huangpu district for an undisclosed price, and now intends to rename and upgrade the 2004-vintage grade B office building, according to a statement today by Ascendas-Singbridge.
Market sources familiar with the transaction told Mingtiandi that the building sold for approximately RMB 1.35 billion ($195 million) providing AEW with a healthy return on the $147.2 million it reportedly spent to acquire the building in June 2015.
Adding a Second Shanghai Office Asset to the Portfolio
The purchase of the 24,883 square metre property adds a second downtown Shanghai office project to Ascendas-Singbridge’s mainland portfolio. Best-known as a business park developer, Ascendas-Singbridge already has two high tech developments in suburban Shanghai as well as business parks in Suzhou, Hangzhou and Dalian among other mainland cities.
“China has always been a key market for Ascendas-Singbridge and we are optimistic about its prospects and economic development,” said Charles Chan, Ascendas-Singbridge’s Chief Executive Officer for China.
The Jiujiang Lu acquisition will join Ascendas Plaza on Tianyaoqiao Lu in the city’s Xujiahui area in the developer’s Shanghai office portfolio.
Rising Market Brings Quick Flip for AEW
Ascendas-Singbridge’s acquisition comes in the midst of a fever for Shanghai office assets as rising tenant demand for commercial space drives up asset values in China’s commercial capital.
The value of real estate investment transactions in Shanghai rose 34 percent in 2016 compared to the previous year, according to the most recent report by property consultancy Savills. And trades of office properties accounted for 62 percent of the total commercial real estate investment transaction value in the city last year.
That rising market may have provided the opportunity for AEW, which purchased 686 Jiujiang Road (known in Chinese as 宝龙大厦or the Baolong Tower) in June 2015 from Blackstone for approximately $147.2 million, according to data from real estate information provider Real Capital Analytics.
David Schaefer, AEW’s head of Asia, commented in a statement at the time of the 2015 acquisition that, “Strong occupier demand in Shanghai going forward should continue to support occupancy and rental growth for the property.” AEW failed to respond to requests from Mingtiandi for comment on this latest transaction before publication time.
The investment manager purchased the property on behalf of its AEW Value Investors Asia II fund, the second value-added fund focused on Asia by the real estate investment firm. Market reports at the time indicated that AEW already had 686 Jiujiang Road on the market by September of last year.