CapitaLand said on Monday that it entered a 50:50 joint venture to acquire around 70 percent of the Pufa Tower office property in Shanghai, China, for 2.752 billion yuan, or around S$546.3 million.
It didn’t name the joint venture partner.
The office property is expected to become a “seed asset” for a value added fund which the Singapore property developer is setting up to invest in commercial real estate in gateway cities in Asia, it said in a filing to SGX before the market open on Monday.
Pufa Tower is CapitaLand’s first office property in Shanghai’s Lujiazui central business district, or CBD, in Pudong New Area, and its acquisition would bring to 21 the number of commercial properties it owns and/or manages in Shanghai, the filing said.
“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,” CapitaLand said in the statement.
The building is 34 storeys high, with three basement car park levels, it said.
Lucas Loh, president for China and investment management at CapitaLand, said that the acquisition would immediately contribute to recurring income.
“We see significant potential in enhancing its asset value by upgrading specifications, tenant mix and improving operational efficiencies,” Loh said in the statement. The building hasn’t had a major renovation since completion in 2002, the statement said.
Loh added that using third-party equity in the transaction would also drive “capital efficiency.”