A joint venture between Greenland Group and the Shanghai government has agreed to sell one of the commercial towers in its RMB 100 billion ($14 billion) Greenland Bund Centre to Bank of Shanghai, just five months after Haitong Securities purchased three headquarters buildings in the mixed-use project.
The bank has agreed to buy the 31-storey trophy asset, which is one of 11 commercial properties in the complex just south of Shanghai’s historic Bund riverfront, for RMB 4.9 billion, according to a regulatory filing on Saturday.
The sale comes a year and four months after the city government-controlled developer led by chairman Zhang Yuliang bought out China Minsheng Investment Group’s half stake in the project. That deal last February followed a bond default by the financially troubled investment company, and allowed the project, which remains 50 percent owned by municipal vehicle Shanghai Bund Investment Group, to march forward toward completion.
Acquiring a West Bund Landmark
Located on Xiaodongmen Street in Shanghai’s Dongjiadu area, Greenland Bund Centre is in what was once one of the city’s oldest working class neighbourhoods and is billed as the centrepiece of Shanghai’s redevelopment the area just over 3 kilometres (1.9 mlles) south of the Peace Hotel along the west bank of the Huangpu river.
Designed by Kohn Pederson Fox, the complex will feature seven low-rise headquarters buildings and three office towers – of 141 metres, 150 metres, and 240 metres – which will gradually rise in height towards a 300 metre supertall skyscraper topped by a hotel.
The Bank of Shanghai, which is 27 percent owned by the Shanghai government, is purchasing the third-tallest of these commercial towers – which, once completed at the end of 2021, will have 52,900 square metres of grade A office space.
Based on the transaction price of RMB 4.9 billion, the bank has agreed to pay RMB 92,628 per square metre for the property – 9 percent more than the RMB 84,872 per square metre which Haitong UniTrust Leasing offered up to acquire the nine-storey B1 office property in January.
“Greenland Bund Centre is a landmark project for Shanghai both in terms of location and size,” said Savills’ head of research for China, James Macdonald. He added that the 760,000 square metre development is part of the local government’s One City One Belt strategy, which includes Lujiazui Financial City and the Bund Financial Cluster Belt, a section of Huangpu district stretching south from Suzhou Creek to include the Bund Financial Center, and west from the river to Henan Road, which is part of positioning the city as an international financial centre.
The bank is likely to occupy the property itself, but should it choose to lease any of the space, it could fetch between RMB 7 to 8 per square metre per day, according to Cushman & Wakefield’s head of research for Greater China, James Shepherd.
Braving the Pandemic
The government-controlled bank decided to invest in a new base in its home city even as the COVID-19 pandemic has triggered a downturn in leasing demand in Shanghai.
Net take-up of grade A office space in the mainland commercial hub halved to 69,500 square metres during the first quarter of the year, compared with the same three months in 2019, according to Savills.
The property consultancy’s research chief, James Macdonald, said that the impact of the pandemic would make filling new projects more demanding for developers and landlords in the near future, although this may be offset by support measures, such as the government’s call for rental concessions for small to medium-sized enterprises, and strong growth from the financial, IT and healthcare industries.
In line with the decline in office demand, grade A office rents in prime areas of Shanghai fell to RMB 10.4 per square metre per day during the first three months of 2020, down 1.3 percent from the previous quarter, according to the property consultancy.
Cushman & Wakefield’s Shepherd said that as the pandemic has unfolded this year and tenants have become more cost sensitive, some companies have relocated away from Huangpu, where the Greenland Bund Centre is located, with 19.3 percent of grade A office space in the district currently empty, while leasing rates in the area were also under pressure.
“Huangpu rentals dropped by 2.9 percent in the first quarter and further declines are on the horizon, given the current economic situation and a further 756,000 square metres of new office supply in the pipeline for the district over the next 5 years,” Shepherd said.
Notching Another Sale
The joint venture between Greenland Group and the Shanghai government has notched its latest sale five months after Haitong Securities, the largest investment bank controlled by the Shanghai government, agreed to pay RMB 1.36 billion for the 16,024 square metre B1 headquarters building.
In the same regulatory filing announcing that purchase in January, Haitong said it had also agreed to buy buildings B2 and B3 in the development for an undisclosed sum, helping Greenland Group, which is the largest property developer controlled by the city, to record sales for five of the seven single occupier-friendly headquarters properties in the project.
In July last year, the People’s Insurance Company (Group) of China Limited had acquired the project’s A1 and A2 headquarters buildings at an undisclosed price.
Together with Bank of Shanghai’s purchase announced on Saturday, the joint venture has sold six of the planned eleven commercial buildings in the complex, according to publicly available information.
China Minsheng had originally purchased the mega-development in 2014, but had failed to bring any element of the multi-building plan to completion before selling its remaining stake in the project to Greenland in 2019.
The development’s four high-rise buildings, including T2, are now in the above-ground construction stage, with the superstructures expected to be completed this year.
Diana Li provided research for this story.