CapitaLand has undertaken a concurrent acquisition and divestment of Shanghai office buildings. Through its wholly-owned business unit CapitaLand China, it has entered into an agreement to acquire Guozheng Center in Yangpu District, Shanghai for $535m.
On the other side of the coin, it is divesting the eight-year-old office building Innov Tower at Shanghai's Xuhui District for $316m.
According to CapitaLand President and Group CEO Lim Ming Yan, this goes to show that China continues to be an attractive core market for the group. He pointed out that the divestment of Innov Tower allows the group to realise the value of a stabilised asset at an optimal stage of its life cycle.
Meanwhile, he noted the acquisition of Guozheng Center allows the group to redeploy the capital to another quality income-generating asset.
"On completion of the two transactions, CapitaLand will have a sizeable portfolio of commercial assets under management in Shanghai, at over 1.3 million sqm in GFA across 17 properties, deepening the Group's presence in China's top tier cities. This enhanced office portfolio in Shanghai will put us in a favourable position to
tap into Shanghai's growth," he said, adding that Shanghai is set to overtake Hong Kong as Greater China's largest office market by 2020.
Meanwhile, CapitaLand China CEO Lucas Loh stated that both properties are located in two different key business districts that are seeing demand from firms keen to locate in Shanghai.
"Given comparable passing rents between the two properties, Guozheng Center offers us an attractive entry yield to enjoy the upside potential of Shanghai's office market, fuelled by the rapid development of key decentralised business districts and strong demand for office space," he said.
He furthered, "At the same time, we are pleased to unlock the value of Innov Tower by riding on the current wave of capital appreciation in Shanghai's office market."
To recall, CapitaLand acquired the property in 2008 and opened in March 2009. Currently, Innov Tower commands one of the highest rents in Caohejing Hi-Tech Park.