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CapitaLand enters joint venture to buy Shanghai office building for S$546.3 million

The property will be used as a seed asset for the group’s new commercial value-add fund.

Real estate company CapitaLand has formed a joint venture to acquire around 70% of Pufa Tower, a prime office building in Shanghai, China for an estimated S$546.3 million (¥2,752 million). The property will be used as a seed asset for the group’s new commercial value-add fund.

The 50:50 joint venture is formed with an unrelated third party. The purchase is the group’s first office property foray into Shanghai’s core Lujiazui central business district (CBD) in Pudong New Area. The buy will help support the new value-add fund CapitaLand is creating to invest in commercial real estates in key gateway cities in Asia.

Standing 34-storeys tall, Pufa Tower is located along South Pudong Road, Pudong, Shanghai and has three basement levels of car park. Following the deal, CapitaLand and its unnamed joint venture partner will take up levels 8 – 19 and 21 – 32, occupying a total gross floor area (GFA) of 41,773 square metres. The rest of the building – including the ground floor lobby and the refuge floor on level 20 – are co-owned with the Shanghai Pudong Development Bank.

CapitaLand thinks the office rental rates in Lujiazui CBD will continue to trend upwards over the next few years. The district, according to the group, fetches the highest office rents in Shanghai, and there is an “unabating demand” for office space as well as limited new office rental supply there.

Commenting on the deal, Mr Lucas Loh, president (China & investment management), CapitaLand Group said: “Pufa Tower is a prime asset to be seeded into the commercial value-add fund we are raising. We see significant potential in enhancing its asset value by upgrading specifications, tenant mix and improving operational efficiencies.”

Mr Loh noted that Shanghai is the top investment destination in China, with strong end-user demand for commercial properties. The acquisition of Pufa Tower, an operational asset, will immediately contribute to the group’s recurring income, he said.

Including the latest acquisition, CapitaLand now owns/manages 21 commercial properties in Shanghai, adding up to close to 1.9 million square metres in GFA.

CapitaLand’s shares jumped 2.29% by midday trading on Monday, up S$0.07, to S$3.13.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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