Hong Kong’s Gaw Capital Partners announced today that a fund under its management had closed on its RMB 5.01 billion (now $798 million) acquisition of two of the four office buildings in Sky Soho, a commercial development in Shanghai’s Changning district, from developer Soho China.
“The acquisition of Sky Soho presents an excellent opportunity to capture the growth opportunities arising from the Shanghai Hongqiao Transportation Hub. Bringing together the Hongqiao International Airport, a high-speed rail station and local transport, the Hub has served as a strong development catalyst for the local area,” Humbert Pang, Managing Principal and Head of China at Gaw Capital Partners said in a statement.
The private equity firm had first agreed to purchase the Zaha Hadid-designed office assets from Soho last October.
Gaw Teams Up With Allianz for Latest Shanghai Buy
The Gaw fund was joined in the acquisition by a consortium of partners including Allianz Real Estate according to an announcement from Allianz, the financial services company will hold approximately 23 percent of the equity in the project, with the investment having been undertaken by Allianz Real Estate on behalf of a number of companies within the group.
“Shanghai, a leading global city, continues to be one of our key investment destinations for commercial real estate. This transaction is the continuation of our strategy to invest in top quality assets with best-in-class operators,” Rushabh Desai, CEO of Allianz Real Estate Asia Pacific said in a statement. “We are also excited about deepening our association with top institutional asset managers like Gaw Capital. This is our second co-investment with them.”
The German financial services heavyweight previously teamed with Gaw in investing in the $2 billion ERES APAC II – China Outlets fund. The fund, which Gaw leads together with TH Real Estate, targets China outlet mall projects and reached a $550 million first close last November.
This latest transaction also marks the second time in the last year that Allianz Real Estate has invested in the purchase of a Shanghai office project from Soho, the developer led by real estate power couple Zhang Xin and Pan Shiyi. Last June the German group backed Keppel Land and Alpha Investment Partners’ purchase of Soho Hongkou from the Beijing-based developer for RMB 3.6 billion (then $525 million).
Gaw said that it “aims to establish the development as a popular lifestyle destination that caters for both the work and lifestyle needs of the young middle-class professionals.” The private equity firm added that it anticipated making physical upgrades to the project and pursuing a new cohort of office tenants.
Deal Concluded at RMB 39,000 per Square Metre
Sky Soho, also known as Linkong Soho, is a set of grade A commercial buildings totalling 350,000 square meters (3.8 million square feet) of gross floor area, of which 220,000 are above ground, including a total 196,000 square metres of office and 23,000 square metres of retail space. The project is located on Beidi Road, in the Hongqiao Linkong Economic Zone, near Shanghai’s Hongqiao airport and close to the city’s western high speed rail terminal.
Gaw’s deal for the pair of office towers includes 128,175 square metres (1.38 million square feet) of space. In its annual report issued last month Soho confirmed the sale of the assets at RMB 5.01 billion, which works out to just over RMB 39,000 per square metre. Gaw’s acquisition comes after Chinese online travel service firm C-Trip had purchased just over 100,000 square metres of space in the complex for RMB 3.05 billion in 2014.
Soho indicated that the project was fully-leased at the time of the transaction. The Beijing-based firm picked up the site in 2010 for RMB 1.56 billion, and the development was completed in November 2014. Soho reported rental income from the Changning project of RMB 193 million last year.