Li Ka-shing Sells Asia’s Priciest Building to China Life-Linked Fund for $2.96B

Companies controlled by Hong Kong billionaire Li Ka-shing have sold the Century Link commercial complex in Shanghai’s Pudong district for RMB 20 billion ($2.96 billion) according to statements to the Hong Kong stock exchange. The transaction sets a 2016 high-water mark for the sale of a single property across the Asia Pacific market.

Li’s Cheung Kong Property Holdings and affiliates of his Li Ka Shing (Overseas) Foundation are selling the combined retail and office project in Pudong’s Zhuyuan area to ARA Harmony VI, a fund managed by Singapore-based ARA Asset Management. Harmony VI is invested by a mainland ensurer along with two other ARA-managed funds, according to a statement from ARA, which is also an affiliate of the property tycoon.

Industry sources who spoke with Mingtiandi regarding the transaction, which also set an all-time price record for the purchase of a single asset in Shanghai, identified the mainland insurer as Beijing-based China Life. One of the two funds participating in the deal, Peninsula Investment Partners, is said by ARA to be managing the assets of Korean sovereign wealth funds, with that investor previously having been identified by third parties as the Korean Investment Corporation (KIC).

Li had reportedly put the 360,000 square metre complex on the market over one year ago, and seems to have waited since then to get his asking price of RMB 20 billion, as a wave of liquidity has steadily driven up real estate values on the mainland.

Chinese Insurers Continue to Drive Real Estate Deals

For China Life, Century Link is the latest in a series of global real estate acquisitions by the mainland’s largest insurer. At the end of 2015, China Life had $362.1 billion in total assets, and since that time it has put several billion dollars into property investments, including the $1.4 billion acquisition in July of a portfolio of six mainland malls. For that acquisition from China’s Joy City group, China Life had partnered with Singapore’s sovereign fund GIC.

Also this year China Life had teamed with New York’s RXR Realty to invest $1.65 billion into a Manhattan office tower, and just one week ago acquired a $2 billion stake in a portfolio of US hotels from Starwood Capital Group.

Pudong Bets Paying Off

Cheung Kong Property, which held a 50 percent interest in the project, expects to realise an unaudited gain of approximately HK$6.22 billion ($802 million) according to a statement by the company. Together with then-sister company Hutchison Whampoa Property, Cheung Kong Holdings purchased the site in 2005 for RMB 12,000 per square metre in terms of built space. The two companies restructured last year with the tycoon’s real estate assets being merged into Cheung Kong Property. The consolidated entity will now be receiving RMB 55,555 per square metre for the largely completed project.

Century Link, which consists of 130,000 square metres of office space spread across two 34-storey towers and a six-storey, 139,000 square metre shopping center, opened its first 64,580 square metre office tower for occupancy during the second quarter of this year.

Cheung Kong began leasing the project last year, with demand aided by its location above the Century Avenue metro station and the continuing strong interest in high grade office space in Pudong. The Century Avenue station serves four metro lines, and vacancy rates for grade A office space in Zhuyuan, which is just east of the Lujiazui financial district, were estimated to be at around nine percent at the end of the second quarter, according to reporting by Savills.

The Century Link transaction comes just three years after Li’s Cheung Kong and Hutchison sold the Oriental Financial Center in Lujiazui for a then record-setting $1.15 billion.

Superman Wins From Several Angles

While Cheung Kong and Li’s other companies are divesting 100 percent of Century Link, the structure of the deal means the former plastic flower salesman known as “Superman” for his investment prowess will continue to profit from the project for years to come.

As part of the sale purchase agreement for the property, CK Property will benefit from ARA’s ongoing management of the investment, as the property firm owns 7.8 percent of the asset manager. Also as part of the agreement, ARA subsidiary APM China, will be the property manager for Century Link.