Tishman Speyer Completes $50M Hotel Buy for First Shanghai Multi-family Project

An investment fund managed by Manhattan-based developer and investor Tishman Speyer has completed its acquisition of a majority stake in a hotel in northeastern Shanghai’s Yangpu district, with the property set to be converted into serviced apartments operated by Singapore’s Frasers Hospitality.

Under the terms of the transaction, which was agreed in December, a Tishman vehicle purchased the 296-key Holiday Inn Express Shanghai Wujiaochang from Hong Kong-listed agricultural and investment firm EverChina International Holdings for a consideration of RMB 360 million ($50.4 million), with 75 percent of the equity in that entity to be sold to the fund and EverChina taking the remaining 25 percent.

“This acquisition presented an attractive opportunity to diversify our Shanghai portfolio,” Wilson Chen, chief executive of Tishman Speyer China said in a release. “We will leverage our extensive mixed-use experience and deep local knowledge to deliver quality housing that is in high demand in the market.”

The project marks Tishman’s inaugural multifamily project in Shanghai, as well as the second mainland collaboration between Tishman and Frasers, with the partners having established a joint venture in May 2023 to acquire a 325-unit set of rental apartments in Shenzhen’s Luohu district to be branded and managed under Frasers Hospitality.

Yangpu District Hub

As a general partner, Tishman owns a 2.5 percent stake in the fund investing in the property, in addition to serving as its manager. The vehicle’s limited partners are mainland trust companies National Trust and Guotong Trust, which own 54.51 and 31.51 percent of the vehicle respectively, and an investment firm affiliated with Shandong-based steel firm Shiheng Special Steel Group Co, which holds the remaining 11.48 percent.

The purchase includes the hotel, which spans 15,949 square metres across 20 storeys, as well as 18,329 square metres of parking space occupying two underground levels. The property forms part of the Yifu Business Plaza commercial complex, which is located at the intersection of Huangxing Road and Guoshun Road in Yangpu district – roughly one kilometre from the Guoquan Road station on line 10 of Shanghai’s metro system.

The consideration, which reflects cash compensation for the assets with the parties having not disclosed any liabilities associated with the property, represents a 6.8 percent premium to the combined RMB 337 million value of the hotel and parking facility per an appraisal in December 2023. Based on the RMB 306.4 million consideration for the hotel portion, the asset traded hands at a price of RMB 19,208 per square metre, or RMB 1,034,966 per key.

Despite the HK$8.1 million gain that EverChina expects to book on the sale, the appraised value of the assets represents a HK$209 million ($26.8 million) investment loss for the company, which had company paid HK$573 million to acquire the property in November 2014.

EverChina, which is controlled by mainland billionaire Jiang Zhaobai and primarily engages in soybean farming and cattle raising in Bolivia, offloaded its majority stake in the property to alleviate its debt burden. Jiang also controls conglomerate Shanghai Pengxin Group, which engages in property development, infrastructure construction, agriculture, and mining.

The project is also located less than four kilometres from The Springs, a 900,230 square metre campus developed by Tishman that includes offices, residences, hotels, retail and entertainment venues, as well as public parks and other open spaces.

In March, Tishman Speyer announced an agreement with Diaoyutai MGM Hospitality, a joint venture between mainland hospitality provider Diaoyutai State Guesthouse and US gaming and hospitality giant MGM Resorts International to create and operate a 205-key Mirage by MGM inside a 56-storey tower that Tishman and Shanghai Chengtou Holding are developing within the complex.

Upgrades on the Way

Frasers is set to operate the asset under its Modena by Fraser brand following a projected 16-month refurbishment that will give the property 305 serviced apartment units catering to “mid to high-end” customers seeking short and long-term stays. Upon completion, the project is set to feature studio, one-bedroom, and two-bedroom units located on levels 2 through 20 of the development, with the property expected to open on a trial basis in April 2025.

Tishman, which is managing the project’s RMB 146 million refurbishment, will also reconfigure the building’s lower levels to include a redesigned entrance, dedicated lobby and a range of amenities for residents, including a fitness center, all-day dining restaurant and multifunctional rooms, in addition to making improvements to the building’s façade.

Operating as a subsidiary of SGX-listed Frasers Property, Frasers Hospitality will be sole manager of the apartments for a 10-year period, with the contract for that role renewable thereafter on a five-year basis under the management agreement.

Shanghai Rental Housing in Vogue

Tishman’s acquisition comes as global investors are committing more cash to rental residential projects in Shanghai on the back of strong demand from young professionals, increasing preference for renting amid high home ownership costs, and policy support.

“China/Shanghai’s residential leasing market continues to attract significant investor interest,” James Macdonald, head of research for Savills China told Mingtiandi. “The market is believed to have a degree of depth that some of the other niche sectors do not, including strong government support and structural drivers.”

In April, Chicago-based LaSalle Investment Management launched its second rental housing project in Shanghai under its newly established COZI brand as part of its strategy to invest RMB 10 billion ($1.4 billion) in China’s rental housing sector within the next three years.

In September of last year, US fund manager PGIM Real Estate led a joint venture with the apartment management unit of mainland hospitality giant H World Group to acquire an apartment building in Shanghai’s Baoshan district from its developer, Hong Kong-listed Powerlong, with plans to develop a 500-unit residential project.