Keppel and Alpha Lead $525M Purchase of SOHO Hongkou in Shanghai

SOHO China is selling a mixed-use project in Shanghai to a joint venture led by Singapore’s Keppel Land China and Alpha Investment Partners for around RMB 3.6 billion ($525 million), the buyers announced today. The subsidiaries of Singapore’s Keppel Group have teamed up with an unnamed partner to purchase SOHO Hongkou, an office and retail project in the city’s North Bund commercial area, three months after SOHO said it was dropping its plans to sell the property.

Keppel paid around RMB 51,000 ($7,500) per square metre for the property located nearby the North Sichuan Road metro station, about a 15-minute cross-river commute from the Lujiazui financial district and two stops north of the East Nanjing Road walking street.

The deal comes as SOHO, the commercial developer headed by property power couple Pan Shiyi and Zhang Xin, looks to offload some of its non-core assets while Keppel seeks to grow its commercial presence in China’s gateway cities.

SOHO Still Selling Off 2011 Harvest

Under the terms of the agreement, a unit of Keppel Land China agreed to take a 30 percent stake in the 70,042 square metre project, while Alpha Investment Partners’ Alpha Asia Macro Trends Fund (AAMTF) III will hold a 40 percent stake. The remaining 30 percent will be held by the co-investor, whom market sources have said is Munich-based financial services firm Allianz Group. Global property consultancy CBRE brokered the transaction on behalf of SOHO, according to an announcement by the company today.

SOHO acquired the project site from a pair of Shanghai and Hangzhou-based property firms for RMB 2.47 billion in 2011, and completed construction in the fourth quarter of 2015.  The complex includes 29-storey tower with 65,304 square metres of Grade A office space, and a two-storey retail podium spanning 4,738 square metres. The building is said to be 97 percent occupied, with Panasonic anchoring the office tower and China Pacific Insurance also a tenant.

SOHO China chairman Pan Shiyi revealed in August 2016 that the company was looking to dispose of three “non-core” properties in Shanghai, including SOHO Hongkou, SOHO Tianshan Plaza, and Lingkong SOHO, as part of a strategy of selling off peripheral projects to focus on prime revenue-generating assets.

That announcement came just a few weeks after SOHO sold a core Pudong office tower, SOHO Century Plaza, to Shanghai’s Guohua Life Insurance for RMB 3.2 billion ($485 million), equating to RMB 75,001 ($11,300) per square metre.

This past March, Pan told reporters that the firm had been forced to cancel plans to sell SOHO Hongkou. Pan cited tightened regulatory controls that, he said, had killed SOHO’s plans to use the proceeds from the deal to fund an offshore investment. He did not disclose the prospective buyer.

Following the sale of SOHO Hongkou this week, it’s not clear whether the developer still has plans to offload the other two “non-core” Shanghai projects Pan mentioned in his August announcement. SOHO’s portfolio spanning 3 million square metres of completed real estate now includes some 1.7 million square metres of prime office spaces in Beijing and Shanghai.

Keppel Is Hungry for Gateway Office Projects

For Keppel, the Hongkou project is the Singaporean giant’s second Shanghai acquisition in less than a year, after  acquired a newly-completed mall in Shanghai’s suburban Jiading district for RMB 500 million ($74.9 million) last September.

The acquisition of SOHO Hongkou is “in line with our strategy to scale up in high‐growth cities, such as Shanghai, where Keppel Land China has established a firm foothold,” said Keppel Land CEO Ang Wee Gee in a statement.

The deal “will further augment Keppel Land’s commercial portfolio as well as position us well to meet the growing demand for Grade A offices in the city,” Ang added.

Last September, Keppel and its affiliate Alpha Investment Partners shed one of their few commercial assets in China by selling their combined 80 percent stake in the Life [email protected] project to Shanghai-based Chongbang Group for $516.9 million.