Singapore-listed CapitaLand has formed a joint venture with an unnamed investor to buy 70% of the Pufa Tower in Shanghai for RMB2.75bn (S$546m).
The 34-storey building will become the seed asset of a value-add fund that will invest in commercial real estate in key gateway cities of Asia, CapitaLand said in a statement.
The deal will see the JV take ownership of levels eight to 19 and levels 21 to 32, representing 41,773 sq.m. of gross floor area.
Shanghai Pudong Development Bank owns the remaining levels, and will co-own the tower’s ground floor lobby and refuge floor on level 20.
Pufa Tower is located in Lujiazui CBD, a hub for financial and professional services companies in Shanghai.
The JV is anticipating office rents in the Lujiazui CBD to continue trending upwards over the next few years in light of a sharp decline in Pudong’s office supply from this year.
“Continual high demand for quality commercial properties in China’s top tier cities, coupled with low supply, have made the renewal of ageing commercial assets a compelling investment strategy in these markets,” said Lucas Loh, president of China & investment management at CapitaLand.
CapitaLand China CIO Puah Tze Shyang said the tower hadn’t received a major renovation since its completion in 2002.
“While the building is properly maintained, the interior finishes offer room for improvement,” he said.
“After acquisition, we will focus on extracting greater value from the property through a comprehensive asset enhancement initiative.”
CapitaLand now owns and manages 21 commercial properties in the city, totalling nearly 1.9m sq.m. of GFA.
Shanghai is one of five core city clusters under CapitaLand’s China strategy, which includes Beijing/Tianjin, Shanghai/Hangzhou/Suzhou/Ningbo, Guangzhou/Shenzhen, Chengdu/Chongqing/Xi’an, and Wuhan.