Chelsfield, Pamfleet Team Up to Buy SH Offices From Sino-Ocean for RMB 1.5B

UK developer Chelsfield has teamed up with a group of Hong Kong and Malaysian investors to purchase a set of four office buildings in Shanghai for a consideration of RMB 1.5 billion ($210 million), according to an announcement to the Malaysian stock exchange this week.

The London-based property firm, together with real estate fund manager Pamfleet, Malaysian developer Amcorp Properties Berhad and a pair of companies controlled by the family of Hong Kong billionaire Adrian Fu has agreed to acquire the commercial assets in the city’s Daning area, the Kuala Lumpur-based firm revealed in the statement.

The current owner of the assets, which at a total gross lettable area of 37,548 square metres (404,163 square feet) comprise the entire office element of the Lifehub@Daning project, is a 50:50 joint venture between Hong Kong-listed developer Sino-Ocean Land and a fund managed by the state-run group’s private equity unit Sino-Ocean Capital, Mingtiandi has learned.

The Shanghai commercial investment was revealed some eight months after Chelsfield, which established a formal foothold in Asia with its hire of former Grosvenor executive Nick Loup in 2015, had teamed up with ARA Asset Management for a S$555 million office acquisition in Singapore.

Dividing Four Towers Five Ways

The acquisition involves Amcorp Properties paying $23 million for a 40 percent stake in a joint venture with Chelsfield and the pair of Fu family vehicles. The UK firm will pay $17.2 million for a 30 percent holding, with KHI Overseas Ltd and JRN Holdings Ltd, both of which are controlled by the Fu family which once owned the Furama Hotel chain, each taking a 15 percent stake in return for $8.6 million in equity.

At the same time, the consortium will enter into a shareholders’ agreement with Pamfleet Shanghai Real Estate Fund II, which will take a 50 percent equity interest in the joint venture which will be acquiring the properties in the northern part of Shanghai’s Jing An district from the Sino-Ocean entities.

The consortium’s total capital commitment of $57.4 million is being made on the basis that debt financing of RMB 880.4 million will be secured to help finance the proposed acquisition, which is expected to be completed by the fourth quarter of 2019.

Chongbang Project Finds a New Owner

The Chelsfield-led deal is the latest trade of a Lifehub property, with the Daning complex, which was completed in 2006, representing the debut project by Henry Cheng’s Chongbang Group.

The current owners, a joint venture between Sino-Ocean Land and Sino-Ocean Capital, are selling the assets around two years after acquiring them as part of a 200,000 square metre, four-city portfolio purchased from the Bank of China group in 2017.

Based on the total gross lettable area of 37,548 square metres (404,163 square feet), the Chelsfield joint venture is paying the equivalent of RMB 38,724 per square metre for the complex on Gonghexin Road in what was formerly the heart of Zhabei district.

As of the end of June, the office buildings, which are part of mixed-use complex which also includes a shopping mall and a hotel, had an occupancy level of 85.4 percent, and were earning an annual passing rent of RMB 64.4 million. With that level of income, the occupied portion of the property has been leasing at a rate equivalent to RMB 5.5 per square metre per day, according to Mingtiandi’s calculations.

Per Sino-Ocean’s management accounts for the project, the net book value of the assets was RMB 1.09 billion as of 30 June 2019.

Amcorp noted in its stock exchange announcement that Shanghai’s decentralised office market has grown in recent years, while the properties will benefit from the high footfall derived from being part of the  Life Hub@Daning.

While representatives of both Pamfleet and Chelsfield declined to comment at this time, Amcorp indicated that, following the acquisition, the new owners intend to undertake asset enhancement works as well as enhancing the tenant mix with a view to improving rental yields and capital growth of the properties.

Big Deals Keep Rolling Amid Shanghai Slowdown

The acquisition comes as the first half of 2019 saw investment in Shanghai office properties slide to RMB 42 billion, down from the RMB 44.9 billion in assets traded during the first six months of last year, according to JLL.

Despite that 6.6 percent drop in office transactions, the city has seen at least three RMB 1 billion-plus commercial deals since April.

Just last month, a joint venture between Ping An Real Estate and Landsea Green Group agreed to acquire an office property in Shanghai’s Zhangjiang High Tech Park for an undisclosed sum, according to a stock exchange filing.

In May, Singapore-based City Developments Limited acquired 70 percent of the equity in Shanghai Hongqiao Sincere Center from Sincere Group for RMB 1.2 billion, paying the equivalent of RMB 49,000 per square metre for the 34,739 square metre office complex.

In April this year, Canada’s Brookfield Asset Management agreed to purchase a commercial property project in Shanghai’s South Bund area from Greenland Hong Kong at a valuation of RMB 10.57 billion, paying RMB 68,414 per square metre for the 154,500 square metre mixed-use asset.