Partners Group in Talks to Buy Beijing Complex for RMB 5.7B

A consortium including Switzerland’s Partners Group is in talks to acquire a Grade A commercial complex in Beijing for RMB 5.7 billion ($820 million), according to an account this week by Bloomberg.

The Swiss private equity firm is negotiating to acquire the 98,747 square meter (one million square foot) Dinghao Electronics Plaza in Beijing’s Zhongguancun area from Taiwan-listed developer Sino Horizon Holdings Ltd.

Should a transaction take place it would be the latest sign that foreign investors are stepping up their role in mainland China property acquisitions as a local credit squeeze dampens activity by local developers and fund investors.

Zhongguancun Complex on the Block

The target of the talks between Partners Group and Sino Horizon is a 16-storey complex at 3 Haidian Da Jie in northwestern Beijing’s Zhongguancun, which is often referred to as China’s Silicon Valley for its role in accommodating many of the nation’s top technology firms.

The aging commercial project consists of a pair of office towers built around the five-story Dinghao Market, along one of Beijing’s oldest electronics bazaars and home to Lenovo’s flagship store. The market is now in the process of being cleared out, however.

The pair of office towers host some of China’s best-known venture capital investment firms, start-ups and incubators including Sinovation Ventures, DaDa ABC, Auto Home and Zhongguancun Online.

Beijing Tech District Switches From Retail to Office

Zhongguancun has long been known as one of China’s largest consumer electronic distribution centers, and the Dinghao market became an overnight sensation when it opened in 2003. By dividing the shopping space into various themed zones and introducing such new features as intelligent shopping guides, touch screens and a POS payment system, the retail plaza became a mecca for gadget-seekers.

In recent years, as Zhongguancun upgrades itself into one of China centers for technology investment and becomes a hub for online firms, many of the once popular electronic marts in the area including Pacific Digital Plaza, Zhongguancun E-World and Hilon Electronic City have closed down to make way for “an innovation-driven maker economy” as promoted in Zhongguancun’s planning scheme for 2020.

With the pending sale, Sino Horizon has already begun preparing to repurpose the Dinghao market and ceased renewing tenant leases since July. All remaining tenants are preparing to exit by the end of November, according to reports in the local Chinese media.

The Bloomberg account indicated, however, that no deal has been finalised for the sale of the property.

Foreign Investors Step Back into China’s Property Market

Partners Group’s interest in the Beijing deal comes as foreign investors begin to reassert themselves in China’s market for property assets.

During the third quarter of this year, some 36 percent of purchases of income generating real estate assets in Shanghai were made by foreign investors — up from 18.1 percent during the same period in 2017. That rising percentage of foreign-originated deals came as the total volume of investment in real estate assets grew some 6.1 percent over the same period from 2017 to 2018, according to the agency’s figures.

Partners Group makes its global headquarters in Zug, Switzerland, but maintains a Greater China office in Shanghai. According to its website, the private equity investment firm, which manages some $75 billion in assets overall, has invested $15 billion in private real estate and acquired more than 200 property developments globally.

The seller, Shanghai-based Sino Horizon, has developed a number of residential and commercial projects in Shanghai, Beijing and Chongqing, including the popular Sun Moon Light Center in Shanghai’s downtown Huangpu district, neighboring the famous tourist destination, Tian Zi Fang.

That eight-year-old mixed-use development comprises a Grade A office tower, two residential buildings and a 140,000 square meter shopping mall.