LaSalle Investment Management has closed on its joint acquisition alongside a unit of Shanghai-based developer Jingrui Holdings of a retail and hotel property in the megacity’s Hongqiao area, with plans to convert the distressed asset into a multi-family residential project.
According to Jingrui’s interim financial report, the group and its partners signed an agreement to purchase the property near Shanghai’s Hongqiao International Airport in April of this year for RMB 438 million ($68 million) in cash, along with assumption of existing debt, with Jingrui holding a 25 percent interest in the asset.
The redevelopment effort marks the first deal under a new strategic partnership between US fund manager LaSalle and Jingrui Capital, an asset management affiliate of the Hong Kong-listed developer, in which the two firms will invest in and develop multi-family projects throughout China, LaSalle said Tuesday in a release.
“China is one of the key strategic markets for LaSalle,” said Claire Tang, head of Greater China for the Chicago-based subsidiary of property consultancy JLL. “We have seen increasing investment opportunities in China’s gradually maturing multi-family market, driven by a favourable investment environment and demographic trends.”
With the purchase of the distressed five-storey Hongqiao Lianghua Shopping Plaza and its accompanying mid-rise hotel having closed recently, LaSalle and Jingrui look set to begin repositioning the property on Minhang District’s Shenbin Road.
The new owners are rebranding the complex as Real Mix Hongqiao and plan a rental residential section with 583 units under the Real Apartment banner and a retail component called Real Mart, according to LaSalle, which has $73 billion in assets under management. Real Apartment will offer one-bedroom units of 24 to 40 square metres and two-bedroom units of 40 to 60 square metres.
Spanning a site area of 16,702 square metres (179,779 square feet), Real Mix Hongqiao has an expected above-ground gross floor area of 37,575 square metres and an expected total GFA of 64,938 square metres.
Situated about 18 kilometres (11 miles) from the city centre, the property is just a few kilometres away from the Hongqiao airport, which serves mostly domestic and regional flights, and the Hongqiao railway station that adjoins the airport’s Terminal 2.
The partners are taking advantage of a multi-family market in Asia Pacific that remains in the early stages and offers attractive investment opportunities, said Jingrui Capital president Junfeng Geng.
“This project is just the beginning of our strategic partnership with LaSalle,” Geng said. “We look forward to working with LaSalle more closely to develop other leading multi-family projects across the country.”
China Multi-Family Catches On
The news of LaSalle’s partnership with Jingrui follows the recent launch of another China multi-family joint venture involving a US fund manager.
Private equity giant KKR announced earlier this month that it had formed a joint venture with apartment operator Funlive to develop and operate a 3,000-unit multi-family project in the southern suburbs of Beijing.
The project will feature 100,000 square metres of living space and sit next to the interchange of Daxing high-speed rail station and Huangcun subway station in Daxing New Town, a planned community near Beijing’s second international airport.
Jingrui’s previous hookups with US investors include five developments in partnership with Dallas-based Century Bridge Capital, a private equity firm focused on residential projects in China’s second- and third-tier cities.
Century Bridge has committed nearly $79 million via various funds to Jingrui projects in Wuxi, Taicang and Ningbo. The US firm exited the first of two Wuxi projects in 2016 with the sale of a 43.24 percent stake for $41.8 million after investing $32.5 million in 2014.
Note: This article has been updated to show that the acquisition of the Hongqiao Lianghua project included assumption of debt, in addition to the equity compensation. The article also has been updated to remove the reference to the value per square metre, as that number was based on the equity compensation only and did not include the debt element. Mingtiandi regrets the misunderstanding.