Chongbang Buys Out Keppel and Alpha Stake in Shanghai Complex for $517M

Shanghai-based Chongbang Group has agreed to pay Keppel Land China and Alpha Investment Partners a combined $516.9 million to buy back an 80 percent stake held by the two Singaporean investors in the Life Hub@Jinqiao project in Shanghai’s Pudong District. The sale was revealed this week in a joint announcement by the two subsidiaries of Singapore’s Keppel Group.

Keppel Land China and Alpha had put their stake in the retail and office complex up for sale earlier this year, with Chongbang said to have exercised its right of first refusal after other investors had made offers for the property, according to market sources who spoke with Mingtiandi regarding the discussions. Following the transaction Chongbang Group and its subsidiaries will own 100 percent of the Shanghai property.

Alpha Notches 20% IRR on Shanghai Deal

Life Hub, which has been operational since late 2009 has 114,730 square metres (1.2 million square feet of retail space, plus a 10-storey office tower. In a statement, the Keppel Group indicated that the mall is now 97 percent leased while the office tower is fully occupied.

“To capture greater value, new concepts and unique design layouts were introduced to Life Hub to entrench its position as a leading lifestyle destination mall, said Christina Tan, CEO of Keppel Capital and Managing Director of Alpha. She added that, “With the value-adding efforts, we have been able to realise an internal rate of return of over 20 percent on the sale of the development.”

Keppel and Alpha had acquired their stake in the Jinqiao property from Morgan Stanley Real Estate for a reported $425 million in a deal that closed in February 2013. Of the 80 percent stake in the project, Keppel Land China holds 42.5 percent, while Alpha Asia Macro Trends Fund II and a co-investor hold the remaining 57.5 percent. The divestment is expected to be completed by end-September 2016, with Keppel anticipating a gain of approximately $53.4 million from the divestment.

As a fund investor, Alpha would have a significant motivation to achieve a return for its stakeholders, and asset values in Shanghai have been driven to new heights this year by wave of liquidity and record fund-raising by mainland institutions. “The divestment is in line with Keppel Land’s strategy to continually recycle assets to seek higher returns,” Ang Wee Gee, CEO of Keppel Land commented in a statement.

Chongbang Rides Mainland Success

Since opening the Life Hub@Daning project in 2006, Chongbang has gone on to open similar Life Hub projects around Shanghai, including the Jinqiao property as well as developments in Anting and just across the border of Jiangsu province in Kunshan. Chongbang also developed the high-end Sinan Mansions retail development in central Shanghai’s Huangpu district and is currently working on a Life Hub in Hangzhou.

As its project portfolio has grown, the company co-founded in 2003 by ex-Shui On Land executive Henry Cheng and Stephen Wong of Hong Kong’s Edward Wong Development has also expanded its list of financial partners. Singapore’s GIC sovereign wealth fund was an early investor, and in June last year, the developer raised $920 million in new funding from Canada’s Ivanhoe Cambridge and Dutch pension-fund manager APG among other investors.

While analysts predict a challenging future for retail in China, the value of commercial assets in Shanghai has continued to rise. In July developer SOHO China sold its Soho Century Plaza office tower in Shanghai’s Pudong district to Guohua Insurance for RMB 3.2 billion ($485 million).

Even in second-tier cities successful commercial projects are attracting buyers, with CapitaLand Retail China Trust (CRCT) last month agreeing to buy the Galleria mall in Chengdu from BlackRock for RMB 1.5 billion ($226 million).