Treasury China Trust to Acquire Shanghai’s Huai Hai Mall for RMB 575 million

Treasury Holdings Real Estate Pte Ltd, Trustee Manager of Treasury China Trust (“TCT”) and one of China’s leading commercial property players, today announced that it has entered into a binding contract to acquire 100% of the Huai Hai Mall in Shanghai for RMB575.0 million.

Located in the heart of the Shanghai CBD fronting Huai Hai Central Road, this acquisition reinforces TCT’s growth strategy in China’s expanding retail sector. Richard David, Chief Executive Officer of TCT, commented, ”This is yet another exciting development in the progress of TCT and reinforces our position as one of the largest investors in China’s commercial real estate sector, with a major foothold in Shanghai.  With this latest acquisition, our asset portfolio in Shanghai will be increased to 4 properties, totaling in excess of 330,000sqm of gross floor area under management.”

Huai Hai Mall is a four-level property comprising one level of basement and three levels above ground, zoned for retail use with total gross floor area of 7,619.9sqm. The surrounding precinct has undergone a significant transformation over the past two years and is now home to some of the world’s highest profile luxury brands including LVMH, Gucci, Hermes, Bally, Coach, Cartier and Tiffany whilst also featuring multinational mid-market retailers such as H&M, Zara, GAP, C&A, Next, Top-shop and Mango. This has resulted in robust double digit rental growth and low vacancy in recent years, reflecting strong demand for this area.

David further explained TCT’s strategy for the property, “As those who are well versed in China’s commercial real estate sector will understand, securing a multi-level street front retail property on Huai Hai Central Road in the heart of Shanghai is certainly a rare and unique opportunity, made all the more exciting with its excellent prospects for rental and capital growth given the refurbishment and repositioning potential for the property in a well-established luxury goods precinct.”

Huai Hai Mall is currently 70% occupied and earning rents well below market rates and hence this acquisition presents TCT with the opportunity to undertake the complete refurbishment and repositioning of the Huai Hai Mall to double the current rental income over a five-year period. Huai Hai Mall has been independently valued at a 26.0% premium to its acquisition price by DTZ Debenham Tie Leung.

Mr. David further commented, “Through the recent successful refurbishment of our Central Plaza property in Shanghai’s CBD, TCT has demonstrated its clear market leadership in the repositioning of under-performing assets. Accordingly, we are very confident of our ability to realise our longer term plans for the Huai Hai Mall and to optimise its location, which is supported by a high quality tenant mix and significantly higher rentals within the vicinity of the subject property.”

With approximately RMB10.0bn of quality commercial real estate assets under management, TCT, which was listed in Singapore in June of this year, is making a targeted expansion into China’s fast moving retail property sector. In December 2010 TCT confirmed its acquisition of a 43,463 sqm shopping mall in China’s eastern provincial city of Qingdao which also includes 170,500sqm of further retail development. The Qingdao and Shanghai acquisitions will complement TCT’s existing 250,000sqm of commercial real estate under management and a further 150,000sqm under development.