Less than three months after announcing a RMB 20 billion fund to redevelop commercial properties in China’s first tier cities, Warburg Pincus-backed Nova Property and Sunac China Holdings have teamed up to acquire a pair of commercial buildings in Shanghai’s Huangpu district for RMB 1.86 billion ($290 million).
The development duo late last month joined with Singapore’s Metro Holdings and Urumqi-based Hualing Group to take a 90 percent stake in the Shanghai Square shopping centre, formerly known as Infiniti Plaza, from Lanzhou Minbai Shareholding Group, a subsidiary of Zhejiang private enterprise Honglou Group, according to a statement posted on the Shanghai Stock Exchange by Honglou Group.
As part of the same deal, the investors have also wonthe rights to a second 14,372 square metre property a few blocks east of Shanghai Square on Renmin Lu. Warburg Pincus declined to comment on the deal when reached by Mingtiandi. Nova Property did not respond to Mingtiandi’s enquiries.
Square in Prime Location
Sunac and Qian Wang, chairman of Nova Property, will take 20 percent and 10 percent stakes respectively in the consortium, while Hualing Group and Metro Holdings will both own 35 percent stakes. Honglou Group is retaining a ten percent stake in the asset. The new owners win the rights to Shanghai Square’s 40,700 square metres (438,091 square feet) of retail space located at 138 Huaihai Road, along one of Shanghai’s best-known shopping strips.
The six-storey retail complex is close to Lippo Plaza, Lai Fung’s Hong Kong Plaza and other major commercial developments, and is five minutes walk from the Dashijie metro station.
As part of the same transaction, the seller is also offloading its full ownership of the Shanghai Fudu Commercial Building at 399 Renmin Road near Yu Garden in Huangpu District. The seven-storey commercial building houses some 600 shops and office space. The Shanghai Square transaction does not include the development’s office space or car parks, which have been under separate ownership.
Taking Over Morgan Stanley’s Former Problem Child
The Nova/Sunac-led acquisition sees a new set of owners taking control of a prime asset that has previously proved problematic for some of the region’s biggest investors. The Huaihai Road complex was acquired by Morgan Stanley Real Estate Investment in 2005 for RMB 928 million, after which the US investment firm refurbished the mall’s interior, rejigged the tenant mix and renamed the building as Infiniti Plaza before reopening the property in late 2007. However, one year later vacancy in the prime retail property was still running at as much as 60 percent.
Honglu Group later purchased the mall from Morgan Stanley for RMB 1.42 billion at the end of 2009. Over the past decade the Zhejiang-based investor has boosted occupancy rate at the mall to around 90 percent by the time that it was put on the market last year, according to data from Savills.
Sunac and Nova Begin Deploying Capital
When Sunac and Nova announced their investment fund in March the pair of developers said that they would be targetting opportunitities to acquire and redevelop shopping centres, office buildings and hotels in China’s first and second-tier cities. While Nova is best-known for its long-term rental apartment platform, the partnership said that they would set up a platform to co-manage the projects acquired by the fund, and Sunac would develop and transform the properties. The fund was said to be in the process of raising capital and was in talks with local and overseas investment institutions.
Nova Property Investment, co-founded by Warburg Pincus and Chinese real estate entrepreneur Qian Wang in 2015, typically acquires properties with high growth potential for conversion into for-rent flats and creative office spaces.