Real estate private equity firm InfraRed NF has joined with a mainland investment start-up to purchase an 84 percent stake in a $112 million commercial complex in Shanghai’s former French concession, according to an announcement last week.
Through a joint venture with Collab Real Estate, a Shanghai-based firm founded by former Nova Property Investment chief Wang Qian, InfraRed NF plans to renovate the four-building project into a creative office and retail destination, according to company executives who spoke with Mingtiandi.
“This is another showcase of our strategy to acquire well-located but distressed or under-performing assets disrupted by technology and new economy, at discount to replacement cost, and generate value by creating spaces catering for the new economy and the evolving work and lifestyles of a new generation,” InfraRed NF’s chief investment officer, Hans Kang said.
Value-Add Project Targets TMT Tenants
The joint venture has acquired its controlling stake in the complex at 277 Wuxing Road from Shanghai-based non-performing loan specialist Wensheng Asset Management Co, which will retain a 14 percent interest in the project.
The team is said to be currently completing design work before beginning conversion of the one-time silk factory into a creative commercial complex, with plans to use 70 percent of the 18,466 square metre (198,766 square foot) complex as office space, and the remainder for retail purposes.
The project between Zhaojiabang Road and Jiangguo Road in Xuhui district includes an existing 14-storey tower with 1,100 square metre floor plates with the joint venture targetting technology, media and advertising firms as future tenants, as well as new economy manufacturers. The four buildings in the development which the partners have dubbed “Project Sycamore” are arrayed around a courtyard in the famously leafy section of Shanghai.
Renovation work, which includes some structural strengthening in addition to creating a new facade and upgrading the mechanical and electrical systems, is expected to be complete by the summer of 2021, and the joint venture is said to have already begun marketing space in the facility to prospective tenants.
Putting Together a Team
The partners had signed a sale and purchase agreement for InfraRed NF’s fourth value-add investment in Shanghai during November, after beginning negotiations during mid-2019, Mingtiandi understands. Earlier, Wensheng AMC had acquired the asset by purchasing the debt of a local private investor who had acquired the complex from a state-owned enterprise in 1988.
Before teaming up with InfraRed NF and Collab, Wensheng AMC had succeeded in securing a fresh 50-year commercial land tenure for the project – a rare commodity in a part of Shanghai where many properties remain in government hands.
“There has been no new land supply in this area of the city in the last five years,” InfraRed NF’s Kang pointed out. He added that the team is targetting boutique shop operators and fine restaurants for the retail portion of the project.
Hong Kong-based InfraRed NF plans to work together with Collab, which was established just last year, to manage the asset.
Relationship Enters a New Phase
InfraRed NF, which itself is a joint venture between the UK’s InfraRed Capital Partners and a unit of Hong Kong’s Nan Fung group, was familiar with Wang Qian and the team at Collab after having worked with them previously when Wang was piloting Nova Property Investment, a firm which the US-educated executive had co-founded with Warburg Pincus in 2015.
In 2018, Nova had joined up with InfraRed NF to acquire the Hongkou Brilliant (Bailian) shopping centre for RMB 465 million ($73.8 million), and the two companies had also worked together to acquire the Puxi Kaiyuan hotel, which were converted into rental apartments under the Base brand.
Nova is said to be a minority shareholder in Collab, which also worked together with Prudential real estate fund management affiliate PGIM late last year to acquire a retail podium on Xietu Road for an undisclosed sum.