Rockefeller JV Selling Shanghai Bund Buildings to Tencent, Ant-Backed Insurer for $199M

A joint venture controlled by New York’s Rockefeller Group has agreed to sell a pair of office buildings on Shanghai’s Bund waterfront to an online insurer backed by Ant Financial, Tencent and Ping An, with the HKEX-listed firm vowing to make one of Shanghai’s oldest neighbourhoods into a fintech hub.

ZhongAn Online P&C Insurance is acquiring the buildings located within the Rockbund development, a restored street of 19th-century buildings behind the Peninsula Hotel in Shanghai’s Huangpu district for a total consideration of RMB 1.44 billion ($198.5 million), with the company, which already occupies the properties, seeing an opportunity to attract more  online finance firms to the area near the banks of the Huangpu River.

“Currently, Huangpu District, Shanghai is committed to building a FinTech ecosystem, and promotes the clustered development of the FinTech industry,” ZhongAn said in a filing. “Through the Acquisition, the Company will further strengthen its strategic cooperation with the territorial government to build a representative and exemplary world-class FinTech cluster. The Acquisition can reduce the Company’s rental costs, which will have a positive impact on reducing the Company’s overall costs.”

Rockefeller Group, a subsidiary of Japanese developer Mitsubishi Estate which partnered with HKEX-listed fintech and property investment firm Sinolink Worldwide Holdings in 2006 to develop the 94,080 square metre (1 million square foot) Rockbund integrated project, is offloading the properties after slumping demand and oversupply drove vacancy in Shanghai’s grade-A office market to 21.7 percent in the first quarter, according to Savills.

Historic Bund Site

ZhongAn is acquiring 219 Yuanmingyuan Road, which measures 6,563 square metres of gross floor area, and 108, 118 and 122 East Beijing Road, also known as the ZA Andrews & George Building, spans 9,381 square metres across 14 storeys. The insurer currently leases office space in both buildings.

The total consideration, which is being funded by ZhongAn’s internal resources, includes RMB 591.4 million for 219 Yuanmingyuan Road and RMB 845.2 million for the ZA Andrews & George Building, with each asset changing hands at the equivalent of RMB 90,100 per square metre.

The acquisition price represents a 3.4 percent discount to the assets’ independently appraised value of RMB 1.49 billion as of February, with ZhongAn and Rockefeller Group having arrived at that price through negotiations which took into account the appraised value, prevailing market conditions and current selling prices of comparable properties in that locality, ZhongAn said in the filing.

Built in phases and fully completed in 2023, 14 years after construction began, the Rockbund project was developed by Shanghai Bund de Rockefeller Group Master Development Co Ltd, a 51:49 joint venture between Rockefeller Group and Sinolink. The complex, which includes properties built on the site of the former British consulate, is situated between Huqiu Road and Yuanmingyuan Road where East Beijing Road intersects with the Huangpu riverfront.

The complex comprises retail and F&B outlets, offices, apartments and cultural facilities, which were restored and renovated from a collection of 11 heritage buildings and also includes six newly constructed properties.

Located behind the Peninsula Hotel on Beijing Road, the ZA Andrews & George Building was renovated from a three-storey heritage building, with the joint venture having added eleven levels to the original 19th century structure. 219 Yuanmingyuan Road is a newly built office building located across Rockbund’s cobblestone lane from the former Union Church, with the lower floor home to a local cafe.

The assets are being offloaded as average grade-A office vacancy in the Bund area rose to 16.1 percent in the first quarter, compared to 13.2 percent in 2021 when the ZA Andrews & George Building was completed, according to Knight Frank. The retail element of Rockbund struggled to retain luxury tenants in the face of sparse crowds and sagging sales, even before the pandemic, with West Nanjing Road, Central Huaihai Road, and Pudong’s Lujiazui area continuing to dominate retail traffic.

Sinolink, a founding investor in ZhongAn, is controlled by former ZhongAn chairman Ou Yaping, who stepped down from his role at the insurer in July 2023 due to “personal work arrangements” but remains a non-executive director of the company. Ou and Sinolink held 9.41 percent and 5.51 percent stakes in ZhongAn respectively as of December. Zhong An was founded by Alibaba’s Jack Ma, Tencent’s Pony Ma and Ping An Insurance’s Mingzhe Ma in 2013.

Shanghai Office Slump

The transaction comes as record-high vacancy and sliding rents dent office property values in China’s commercial capital. Average vacancy in the first quarter was up 5.8 percentage points compared to the same period a year earlier, while average grade-A office rents have fallen 9.1 percent from 2021 levels, according to Savills.

The record vacancy is being exacerbated by a wave of new supply, with one million square metres of new office buildings expected to hit the market in the first half of this year, according to the consultancy.

State-backed Shanghai Lujiazui Development Group Co Ltd, which is scrambling to sell about 20 Shanghai office towers centred in the Lujiazui financial zone and Qiantan International Business Zone on the east side of the Huangpu River, warned in its annual report released last month that Shanghai’s office market faces a “long-term correction”.

Shanghai’s office market slump last year motivated US investment management giant BlackRock to put on the market a pair of office buildings in the city’s Putuo district at a 30 percent discount to what it paid to acquire the properties six years ago.