Singapore’s GIC is buying out its partner’s half-stake in a Beijing office building for around RMB 3.03 billion ($433 million), as the sovereign wealth fund bets on the capital’s emerging business district.
GIC is purchasing the 50 percent stake in the Azia Tower that it doesn’t already own from state-owned Beijing Capital Land, the builder which completed the 42-storey tower in partnership with the Singaporean fund early last year.
The Azia Centre adopts the same name as a building which GIC developed in Shanghai’s Lujiazui area in 2005 when that financial hub was still on the upswing, with some analysts seeing the Singapore giant following a similar investment strategy in the Lize Financial district project.
Betting on Connectivity in an Emerging District
In a statement announcing the buyout, GIC pointed to the Azia Tower’s location on Lize Road and its connection to the Lize Business District metro station, which will link lines 14, 16 and the Daxing Airport Express when it opens in 2021, as important attributes for the asset.
At the RMB 3.03 billion transaction price, which was revealed in an announcement to the Hong Kong stock exchange by Beijing Capital Land, the sovereign wealth fund is paying the equivalent of RMB 156,946 per square metre for the property, which measures 38,612 square metres (415,616 square feet) by gross floor area.
An independent valuation report by Cushman & Wakefield dated 18 October valued the asset, only 16,217 square metres of which was leased as of 31 July, at RMB 4.91 billion, based in part on the Azia Tower’s annual rental income of RMB 48.8 million from those tenancies, exclusive of VAT and management fees.
GIC holds a 9.8 percent stake in Hong Kong-listed Beijing Capital Land and is the developer’s second largest shareholder. Before the transfer to GIC was announced, Beijing Capital Land had listed the equity stake in the project company which holds the Azia Tower on the China Beijing Equity Exchange, a process that all mainland state-owned enterprises must go through before disposing of assets.
Looking Forward to Lize
Analysts from JLL in Beijing see GIC’s investment as a wager on the long-term prospects of the Lize Financial Business District, an eight square kilometre (3.12 square mile) development zone in southern Beijing’s Feng Tai district.
“The key thing to consider is to look at this from a long term perspective,” said Eric Hirsch, head of markets at JLL Beijing. “GIC was one of the early investors in Beijing’s CBD, with The Exchange Building. We now see them getting actively involved in one of Beijing’s up and coming future submarkets, Lize.”
The Azia Tower, which is one element of a masterplanned site which Beijing Capital Land acquired for a combined RMB 5.1 billion in 2013, is Lize Financial District’s tallest building.
“We see this as an overall positive assessment on the future of Beijing’s office market,” Hirsch added. “While this submarket is seeing a lot of new construction and is immature, this is perhaps a demonstration of positive things to come.”
The veteran office broker also noted that GIC’s compatriots from Mapletree had invested in another project within the same compound. Overall, the site is approved for development of two grade A office towers, a hotel, residences and a retail centre, along with additional office space. Last September, Beijing Capital Land sold a 51 percent stake in a commercial segment of the project, which includes two office towers and a retail centre to Longfor Properties for RMB 598 million.