AEW Capital Management has been revealed as the buyer behind a recent $226 million (RMB 1.5 billion) deal for Shanghai’s Innov Tower, it was reported today. The Boston-based real estate private equity firm picked up the fully leased office tower in the city’s Caohejing High-Tech Park from CapitaLand in a transaction that was announced at the beginning of June, according to a report in Institutional Real Estate, Inc.
The deal marks the 11th and final property acquisition of AEW Value Investors Asia II, a $640 million value-added fund focused on gateway cities in the region, and comes less than three months after AEW disposed of another Shanghai office asset.
Buying into an Established Business Park
Innov Tower is a 23-storey, en-bloc office building that was completed in 2009. The 40,445 square metre property was said to be 99 percent occupied as of April. At the time of the deal, CapitaLand said that Innov Tower commands one of the highest rent levels in Caohejing Hi-Tech Park today as a result of the company’s value-boosting asset management efforts over the years.
Singapore’s biggest developer CapitaLand sold Innov Tower in tandem with its acquisition of a newly completed office project, Guozheng Centre, for RMB 2.64 billion ($388.6 million). Through the twin transactions, the property giant aimed to unlock investment gains from the office tower it bought in 2008, while immediately reinvesting its capital into a higher-yielding project in Shanghai’s developing Wujiaochang area.
Caohejing Hi-Tech Park is one of Shanghai’s earliest high-tech business parks, located in Xuhui district, a roughly 30-minute drive southwest from the city’s central People’s Square area.
AEW Does Another Shanghai Deal with Singapore Inc.
The Innov Tower buy marks the second time this year that AEW partnered with a Singaporean firm to transact a Shanghai office asset on behalf of its AEW Value Investors Asia II fund. This past March, the US real estate investment manager flipped a 14-storey Grade B office tower near People’s Square to Ascendas-Singbridge, the developer owned by Singapore’s Temasek Holdings and JTC Corporation.
Although the price was undisclosed, market sources told Mingtiandi that AEW sold the building, 686 Jiujiang Road, for approximately RMB 1.35 billion ($195 million), earning a solid return after spending a reported $147.2 million to acquire the property in June 2015.
AEW Value Investors Asia II is AEW’s second value-added pan-Asia fund. The vehicle closed in June 2016 with capital raised from US and European pension plans and insurance firms. The almost fully invested fund’s strategy targets real estate acquisitions in the gateway cities of Shanghai, Hong Kong, Singapore, Seoul and Sydney, and involves repositioning and upgrading properties into core stabilized assets. A new vehicle, AEW Value Investors Asia III, is currently fundraising with a target of $750 million.
The office investment market in Shanghai was off to a strong start in the first quarter of this year, with ten major deals totalling RMB 13.6 billion (about $2 billion) being transacted, according to international property consultancy Savills. Domestic buyers accounted for some 69 percent of total transactions, with international investors focusing on value-add office opportunities in central locations.