Borui Plaza has stayed fully occupied through the downturn
CapitaLand Investment (CLI) sees China’s property downturn as an opportunity to expand its mainland holdings with the company acquiring an office building near Beijing’s embassy area this week through a court-arranged auction.
With the Chinese capital in the depths of real estate winter, the Singaporean giant is picking up Borui Plaza in Chaoyang district for RMB 2.04 billion ($282 million), or the equivalent of RMB 34,977 per square metre of total gross floor area. That price represents 30 percent off the rate of RMB 49,967 per square metre reckoned in an independent valuation report from September of last year.
“CLI holds a long-term view of China, with a focus on first and second tier cities in five core city clusters. Our extensive presence on the ground presents a competitive advantage for CLI in identifying and capitalising on attractive investment opportunities that are emerging during the ongoing consolidation of China’s real estate sector,” said a CLI spokesperson who confirmed the deal with Mingtiandi.
The deal is CapitaLand Investment’s fourth major acquisition in China this year, at a time when vacancy in the capital’s grade A office market is expected to soon surpass 15 percent and many investors wait for an end to the country’s strict pandemic measures to rebuild confidence.
Grabbing Opportunities
Beijing Shiba Shiyi Enterprise Management Consulting Co Ltd, a CapitaLand subsidiary, won the 2012-vintage asset through an online auction conducted on behalf of Xiamen International Bank, which had obtained the property in January 2021 after Dalian-based developer Yongjia Group had defaulted on credit provided by the Fujian lender.
CapitaLand’s CEO Lee Chee Koon
“As I see it, CapitaLand is grabbing an opportunity at a time when others hesitate. After we pass this difficult period, people may look back and give CapitaLand a thumbs-up for their long-term vision,” Gordon Liu, deputy managing director of capital markets for China at Cushman & Wakefield, told Mingtiandi.
As the only bidder for Borui Plaza, CLI acquired the property at the auction reserve price, according to results posted to the auction page on the JD platform.
The building measures 58,240 square metres (626,890 square feet) by gross floor area, and when calculated by above ground space, CLI is paying RMB 45,500 per square metre for what will be its second office asset in the capital, alongside Raffles City Beijing.
The purchase gives CapitaLand the office segment – floors four through 25 – of the 25-storey tower, as well as four underground parking levels. The retail space on floors one through three was not included.
Prime Location
The 25-storey tower at A26 East Third Ring North Road is situated in a commercial hub between Beijing’s embassy area and the capital’s core CBD where state media groups including CCTV and People’s Daily are headquartered. It is about 10 minutes’ walk from the Tuanjiehu metro station.
Online listings for office space in the tower show the building’s average rent at RMB 10 per square metre per day, which according to market sources is on par with buildings in the area.
“Borui Plaza is in a very good location and has faced no pressure in leasing. It has been almost fully occupied all the time,” Cushman & Wakefield’s Liu said.
Tenants currently in the building include life insurer AIA Group, American brewery Budweiser, and Alibaba-backed parenting site Babytree.
CLI is buying the property at a time when office demand in Beijing is at a historical low with net take-up citywide down 63.8 percent in the third quarter from the preceding three months, according to data from Cushman & Wakefield.
Assets Expand
CLI registered as a private equity fund manager in China in 2021 and in June established its first onshore RMB fund with the vehicle acquiring an office building in Shanghai. The Borui Plaza acquisition is understood to not be part of the RMB fund.
In addition to the pair of office deals, CapitaLand in April, acquired a residential site in Wuhan for RMB 2.3 billion and another housing project in Chengdu for RMB 1.2 billion.
Following completion of relevant legal procedures Borui Plaza will join CLI’s existing mainland portfolio of more than 200 properties across over 40 cities, where the company has total assets under management of $26 billion.
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