Carlyle & CLSA Sell Shanghai Office Building to Yuexiu REIT for RMB 2.63B

A company belonging to private equity firms Carlyle Group and CLSA Capital Partners has sold an office tower in Shanghai’s Pudong district to Hong Kong-listed Yuexiu REIT for RMB 2.63 billion ($423 million).

Yuexiu REIT, which is controlled by Guangzhou-based Yuexiu Property, announced the sale of the 46,000 square metre grade A commercial building to Century Holding Company, a company jointly invested by Carlyle and CLSA, on August 2nd.

The transaction by the international private equity players is the third reported sale of a grade A commercial building in Pudong’s Zhuyuan area, east of the Lujiazui financial hub, in less than a month. The quickening pace of these deals happens as demand for Shanghai commercial space spreads east from the Pudong riverbank.

Hong Jia Bought for RMB1.8B in 2012

Carlyle and CLSA had purchased the 25-storey building in late 2012 for a reported RMB 1.8 billion from the ASE Group. The tower, which was completed in 2010, includes approximately 39,769 sqm of office space and 6,200 sqm of retail space, according to marketing materials published by real estate consultancy JLL.

As of the end of June this year, office occupancy in Hong Jia, which is located near the Pudian Road station on Shanghai’s metro line 4 on Fushan Road, was said to be nearly 100 percent. Retail occupancy was estimated to be at 95 percent. Office rental rates were averaging RMB 7.7 per square metre per day and retail was going for RMB 6.1 per square metre per day.

The acquisition, which still needs to be approved by the trust’s unit-holders, was Yuexiu REIT’s first deal outside of its home market in Guangzhou, and only its second after it acquired the Guangzhou IFC from its parent company for RMB8.85 billion in 2012.

Zhuyuan Deal Activity Picking Up

Pudong’s Zhuyuan area, which stretches east from Lujiazui to Century Park, has now been home to nearly RMB 25 billion in investment transactions in less than one month, according to media reports.

In addition to the Hong Jia deal, on June 22nd China’s Ping An Insurance was said to have purchased the GC Tower in Zhuyuan for a reported RMB 2.24 billion.

Then just last week Li Ka-shing’s Cheung Kong Property Holdings was said to be selling its Century Link commercial project next to the Century Avenue metro station in Zhuyuan for RMB 20 billion ($3.22 billion), according to local press reports. Neither transaction has been officially confirmed by the parties involved.

The interest in Zhuyuan comes after years of Lujiazui rental rates outpacing other locations in Shanghai. Now with space limited in the financial hub, many financial services and high tech firms have spilled over into Zhuyuan. The areas inclusion in Shanghai’s Free Trade Zone, and ample support from the Shanghai government, have also helped to spur interest in the area.

Carlyle Gets Active Again in China

For Carlyle, the sale of Hong Jia is the private equity firm’s first major China activity since 2013. Nearly two years ago Carlyle announced a $400 million joint investment with the Townsend Group and China warehouse developer Yupei to develop warehouses in China.

Also during 2013, Carlyle acquired the Central Plaza commercial complex on Shanghai’s Huangpi Road for $266.73 million from Forterra Real Estate.