CapitaLand Sells RMB 4.5B of SH Office Assets to Value-Add Fund

Just one month after reaching a $391 million first-close on its maiden discretionary equity investment fund, Singapore’s CapitaLand has seeded CapitaLand Asia Partners I (CAP I) with a pair of Shanghai office assets, according to an announcement by the company on Friday.

The Temasek Holdings-backed developer and fund manager is transferring the Innov Center in Shanghai’s Yangpu district into the private equity vehicle at a value of RMB 3.1 billion ($449 million), and it says that it will soon make a similar transaction for its holdings in Pudong’s Pufa Tower.

The asset transfer was announced on the same day that CapitaLand, which leads Asia with some $55.9 billion in real estate assets under management, revealed that it had received its temporary occupancy permit for the former Star Harbour International Center in Shanghai’s Hongkou district, which it has now renamed as Raffles City The Bund.

Moving Completed Yangpu Business Park Asset

“As part of its capital management strategy in China, CapitaLand has today entered into an agreement to divest its interest in companies that hold Innov Center in Shanghai’s Yangpu District to CapitaLand Asia Partners I (CAP I), at a price that takes into account an agreed property value of RMB 3,101 million (about S$621 million),” the company said in a statement.

The Innov Center in Shanghai’s Wujiaochang area was known as the Guozheng Centre until CapitaLand purchased the 80,701 square metre (868,658 square foot) commercial complex from a subsidiary of local developer Shanghai Baohua Group for RMB 2.64 billion in June 2017. At this month’s transfer price CapitaLand is selling the asset to the fund at around RMB 38,426 per square metre, or approximately a 17 percent mark-up over the RMB 32,713 per square metre it had paid to acquire the building two years ago.

“Shanghai Innov Center, a predominantly office integrated development located in a mature, technology-focused decentralised office market, was acquired in 2017 to be the seed asset to kickstart CapitaLand’s discretionary fund business,” CapitaLand president and Group CEO Lee Chee Koon said. “Upon the successful first closing of CAP I, the property will now be transferred to the fund from CapitaLand’s balance sheet.”

The project, which includes three office blocks joined by a separate two-storey retail podium is now set for completion in the third quarter of this year, which the company sees as making it ready for its new fund.

“Since acquisition, CapitaLand, through our market-leading asset management capabilities, has successfully added significant value to the property through asset enhancement initiative and active leasing management, to meaningfully de-risk the property on behalf of CAP I investors,” Lee added. The company did not provide details on tenancy levels or leasing rates.

Pufa Tower Also Headed into Fund

In the same statement, CapitaLand indicated that its stake in the Pufa Tower, which it had jointly acquired with AEW from HNA in January of this year, would also be sold to the fund.

The company did not disclose financial details of the potential transfer of the office asset.

In January of this year, Mingtiandi reported that CapitaLand, through a 50:50 joint venture with Boston-based AEW, had acquired 70 percent of the space in the 34-storey Pufa Tower from HNA for RMB 2.75 billion. That acquisition included 41,773 square metres of grade A office space and another 61 car parking spots in the Lujiazui tower.

RMB 12.8B Commercial Project Ready for Occupancy

CapitaLand further underlined its presence in the Shanghai commercial market with a Friday ceremony in the mainland commercial hub where it touted the opportunities to grow its China business as it completes its merger with Temasek stable-mate Ascendas-Singbridge.

The ceremony was held to celebrate the company having secured the right to start moving tenants into what it has now branded as its ninth Raffles City commercial project in China, in addition to the original development near Singapore’s City Hall.

“This landmark integrated development located in the heart of Shanghai’s North Bund has obtained Temporary Occupation Permit this month and will be opening in phases from 2H 2019,” Lucas Loh, president and CEO of China for CapitaLand Group said.

In a 50:50 joint venture with Singaporean sovereign wealth fund GIC, CapitaLand’s Raffles City China Investment Partners III (RCCIP III) fund in November last year had agreed to acquire what was then the Star Harbour International Center project (上海星外滩) in Shanghai’s Hongkou district for RMB 12.8 billion.

The 312,717 square metre project includes a pair of 50-storey grade A office towers linked at the base by a seven-storey shopping mall. Located along the Huangpu river in Hongkou, Raffles City The Bund links directly to Shanghai’s metro line 12 and the upcoming line 19.