CFA Society Singapore
SINGAPORE (Jan 7): CapitaLand has formed a 50:50 joint venture with an unrelated third party to acquire 70% of Pufa Tower in Shanghai, China, for RMB2,752 million ($546.3 million).
Pufa Tower is 34-storey tall with three basement levels of car park. On completion of the transaction, CapitaLand and its joint venture partner will own levels 8 to 19 and levels 21 to 32 with a total gross floor area (GFA) of 41,773 sq m, as well as 61 car park lots with property title. Pufa Tower’s ground floor lobby and refuge floor on level 20 are co-owned with Shanghai Pudong Development Bank, which owns the rest of the building.
Lujiazui CBD, where Pufa Tower is located, is Shanghai’s most coveted office location for financial and professional services companies. With an unabating demand for office space and limited new supply, Lujiazui CBD commands the highest office rents in the city. In view of a sharp decline in Pudong’s office supply from 2019, office rents in Lujiazui CBD are expected to continue trending upwards over the next few years.
The operational office property has been identified as a seed asset for a value-add fund which CapitaLand is setting up to invest in commercial real estate in key gateway cities in Asia. The acquisition also marks the group’s first office property in Shanghai’s core Lujiazui central business district (CBD) in Pudong New Area.
Lucas Loh, President (China & Investment Management), CapitaLand Group, says: “We are pleased to enter Shanghai’s core Lujiazui CBD soon after securing our third Raffles City development in the city... The acquisition of Pufa Tower, an operational asset, will immediately contribute to the Group’s recurring income.”
With more than 1,300 multinational companies headquartered in Shanghai, the city continues to power ahead as China’s financial and business centre. In 2017, Shanghai became the first Chinese city to top GDP of RMB3.0 trillion, of which contribution from Pudong accounted for about 30%2. The continual expansion of Shanghai’s financial sector is expected to drive the demand for prime office space in Pudong.
Including this latest acquisition, CapitaLand now owns and manages 21 commercial properties in Shanghai that span close to 1.9 million sq m in GFA.
Shares in CapitaLand closed at $3.06 on Friday.