CapitaLand Sets Up First Onshore RMB Fund, Buys Shanghai Building

CapitaLand Investment (CLI) said Wednesday it has set up its first onshore renminbi fund in China with the vehicle acquiring an office building in Shanghai.

CLI holds a 12% stake in the RMB 700 million ($98 million) fund, in partnership with a domestic asset management company, the firm said in a statement.

The Shanghai commercial building is being acquired “at an attractive price”, and the transaction is expected to be completed next month the Singapore-based firm said.

“The office building is a well-located property in Shanghai with a committed occupancy of above 90%. It is a special situation opportunity that allows us to acquire the quality asset at an attractive price,” said Puah Tze Shyang, chief executive for China at CapitaLand Investment, in an email response to Mingtiandi. He declined to provide more information about the property due to confidentiality clauses.

The fund, which is a single-asset fund according to Puah, is buying the property at a time when office demand in Shanghai is at a historical low as businesses struggle to reopen after a two-month Covid lockdown. Before China’s commercial capital was shut down for two months, net take-up was down 28 percent in the first quarter from the preceding three months, according to data from Savills.

China Opportunities Arise

The market downturn has also made available more discounted office opportunities as heavily-indebted developers dispose of assets to repay maturities.

“We are seeing more special situation opportunities in China, where owners who are facing financial challenges are putting up their high-quality assets for sale. At the same time, domestic capital partners in China are looking for reliable partners for investments, and CLI is able to play this bridging role given our extensive local expertise and understanding of the market,” Puah said via email.

Such projects will include industrial parks, industrial and logistics properties, data centers, office buildings, shopping centers and mixed-use developments, CapitaLand China said.

“We are increasing our fundraising channels by tapping on China’s domestic capital, which we believe represents a deep pool of investable capital that enables CLI to further build on its experience and track record in the country,” Simon Treacy, chief executive of Private Equity Real Estate, Real Assets at CLI, said in Wednesday’s statement.

CLI plans to launch more RMB funds and work with its partners to capture investment opportunities in China, Treacy added.

As of the end of March, CLI has a portfolio of more than 200 properties across over 40 Chinese cities, with total assets under management of S$46 billion in China.

New Economy Assets

CapitaLand Ltd, which is controlled by Singapore state investor Temasek Holdings, restructured its business last year after it posted its biggest loss ever in 2020 due to the coronavirus pandemic.

CapitaLand’s revamped real estate investment management business became CLI – Asia’s largest real estate investment management firm which was listed on the Singapore Exchange. Its real estate development business was taken private to free the listed company from the capital demands of building new projects.

As part of the group’s restructuring, it has taken aim at “new economy” assets and has been selling some of its ageing commercial properties.

CapitaLand last June sold partial stakes in six of the nine mixed-use Raffles City developments in China to mainland insurance giant Ping An for more than S$2 billion ($1.5 billion). The group then declared in November 2020 that it would more than triple its holdings in “new economy” areas to over $1.1 billion during the next few years.

Also in line with that strategy, the group has invested in nine industrial parks and one data centre on the mainland, according to the statement from CapitaLand China.

Note: An earlier version of the story indicated that PICC was a likely partner in the CapitaLand fund. Mingtiandi has since been able to confirm that PICC is not involved in the vehicle described in this story.