CapitaLand Announces RMB 4.2B in Shanghai Office Deals in One Day

CapitaLand is betting on the continued growth of the Shanghai office market, picking up a newly completed office project in the city’s Wujiaochang area for RMB 2.64 billion ($388.6 million), according to an announcement today by the Singapore-listed property giant.

And right in synch with that acquisition Singapore’s biggest developer says that it is selling a fully leased office tower in the city’s Caohejing High-Tech Park for RMB 1.56 billion ($229.2 million).

Through the twin transactions, the Temasek-controlled firm intends to reap investment gains from the business park property at a time of robust price growth for Shanghai offices, while immediately reinvesting its capital into a project with significant upside. The deal also reaffirms CapitaLand’s commitment to mainland China’s financial hub, where it owns and manages 17 commercial properties spanning a gross floor area of 1.3 million square metres.

Buying into a Developing District

CapitaLand’s wholly owned subsidiary Shanghai Zhong Da Industry Development agreed to acquire Guozheng Center, a high-quality office property consisting of three buildings in the Wujiaochang area of Yangpu district, north of the city center. The asset is owned by Shanghai Zhuju Real Estate, a subsidiary of local property developer Shanghai Baohua Group. CapitaLand will acquire the office project by purchasing all the equity interest in three companies that own Shanghai Zhuju.

Based on the project’s total gross floor area of 80,701 square metres (868,658 square feet), CapitaLand is paying RMB 32,713 ($4,810.87) per square metre for the property, which was completed in the fourth quarter of last year. Guozheng Center is 23 percent occupied as of this past April, according to CapitaLand.

The property is located in the same neighborhood as US developer Tishman Speyer’s mixed-use The Springs project, and Shui On’s tech-friendly Knowledge and Innovation Community (KIC), which the Shanghai-based developer was reported to be offering for sale last August. The Wujiaochang area is home to a cluster of educational facilities including the top-ranked Fudan and Tongji Universities, in Yangpu district, which the Shanghai municipal government has earmarked as a centre for high-tech development.

Selling Off a Xuhui Office Park Asset

In tandem with this purchase, CapitaLand will also divest Innov Tower, a 23-storey office building it acquired in 2008, to an unnamed buyer. The 40,445 square metre building in one of Shanghai’s earlier tech parks was completed in 2009 and was reported to be 99 percent occupied as of April.

“Innov Tower today commands one of the highest rents in Caohejing Hi-Tech Park – a testament to the value we have created through years of proactive asset management,” said Lucas Loh, CEO of CapitaLand China, in the company’s announcement.

“Both Guozheng Center and Innov Tower are located in two different key business districts of Shanghai, which are seeing strong demand from companies keen to locate in Shanghai but away from the increasingly crowded city centre,” said Loh, noting that both properties are asking comparable rental rates.

Building on a China Portfolio of 3.2M Square Metres

CapitaLand is a leading foreign investor in China’s urban property markets, with a presence in the country dating back to 1994. As of last November, the company’s China portfolio covers 15 cities and includes eight mixed-used Raffles City projects and six other commercial projects, totalling 3.2 million square metres of floor space, plus a pipeline of 42,000 residential units.

The developer announced last November that it will open six new malls in China in 2017. The company has also taken an interest in China’s shared office market, announcing a partnership last December with Beijing-based co-working startup URWork. Under the agreement, CapitaLand will provide space for new URWork co-working centres in CapitaLand malls in China, while URWork will help Singaporean businesses enter the country.

CapitaLand is not the only overseas investor with a stake in the success of Shanghai’s decentralized areas. This past February, Singapore’s City Developments Ltd (CDL) acquired a 32,000 square metre commercial project near the Hongqiao transportation hub, a high-profile infrastructure development at the city’s western edge, for RMB 900 million (about $131 million).