Standard Chartered Marketing Shanghai Office Blocks After BlackRock Default

One year after BlackRock had attempted to find a buyer for a Shanghai office complex at a 30 percent discount to its acquisition price, the world’s largest asset manager has handed over the the Putuo district buildings to its lender, according to market sources who spoke with Mingtiandi.

Standard Chartered Bank is now shopping blocks E and G of the Waterfront Place office complex to potential buyers, the sources indicated, after BlackRock had surrendered the properties to its lender after failing to find a buyer. News of BlackRock’s handover of the assets was first reported by Bloomberg.

The handback forces BlackRock to write off approximately the RMB 1.2 billion (then $184 million) which it paid to acquire Waterfront Place Blocks E and G from PGIM Real Estate in 2018, with the deal seen at the time as a bet on growing demand for office space in China’s commercial capital.

Rents for grade A offices in Shanghai fell 15.3 percent during the fourth quarter of 2024 from the same period a year earlier, according to a recent report by JLL. “Large available spaces continued to put leasing pressure on the market and intensified market competition, pushing landlords to offer more appealing rental incentives,” the property consultancy said in a statement.

More Supply, Fewer Buyers

BlackRock gave up the two buildings, which provide a total of 27,805 square meters (299,291 square feet) of office space, late last year after it did not make payment on a loan at the end of September, per the Bloomberg account. BlackRock had not yet responded to inquiries from Mingtiandi by the time of publication.

The forfeiture came after the lenders had extended that loan for an additional year after it matured in 2023, with the banks declining a second extension, according to the Bloomberg account, which cited sources familiar with the situation.

Standard Chartered has been making the properties available to prospective buyers in recent months but has yet to enter advanced discussions with investors, according to brokers active in the market.

The bank had led the approximately RMB 780 million syndicated loan at the time that BlackRock acquired the complex seven years ago. Since that moment, a combination of policy changes, pandemic shocks and declining confidence among consumers and businesses have driven average vacancy across the Shanghai market to 29 percent at the end of 2024, according to JLL.

Beyond the Centre

Located north of Suzhou Creek along Daduhe Road and West Guangfu Road in northwestern Shanghai, the complex is a five-minute walk from Changfeng Park station, which is served by Shanghai metro’s Line 15, and is a 25-minute drive from the Jing’an Temple commercial hub.

Despite the connectivity, the project near East China Normal University is around 7 kilometres (4.3 miles) west of Jing An Temple and Shanghai’s traditional business core, putting Waterfront Place among the decentralised office projects which have faced challenges as more supply continues to enter the market.

In January last year BlackRock’s Waterfront Place assets were 70 percent to 80 percent occupied according to market sources at the time, with grade A office rents in the Changfeng area where the properties are located averaging RMB 5.68 per square metre per day in the third quarter, according to Colliers.

With Waterfront Place handed over, BlackRock still owns an office asset on Changshou Road, also in Putuo District, which it acquired for RMB 1.37 million in April 2017.  Located at 828-868 Changshou Road, that tower sits opposite Wuning Road metro station and about 2.4 kilometres north of Jing An Temple.

Haircuts Become a Habit

Despite rising vacancy and declining rents, landlords made 661,600 square metes of new office space available in Shanghai last year, according to JLL.

The challenging market conditions have forced other global investors to make difficult decisions regarding mainland China office assets with Carlyle Group selling The Crest, a tower in Shanghai’s Changning district for RMB 826 million in October.

That deal represented a 49 percent discount in US dollar terms to what the private equity firm paid to acquire the 31-storey tower nearly a decade earlier.

In December, Singapore-listed OUE REIT sold Lippo Plaza on Shanghai’s Huaihai Road for RMB 1.92 billion, which marked a 35 percent discount from a 2018 valuation of the 30-storey office tower.