Capitaland to Inject Two Shanghai Office Properties to Maiden Real Estate Equity Fund

(The Straits Times) — CapitaLand will divest from two Shanghai properties, Innov Center and Pufa Tower and inject both into its maiden discretionary real estate equity fund, CapitaLand Asia Partners I (CAP I), as seed assets.

Innov Center consists of three office buildings and a two-story retail podium with a total gross floor area (GFA) of 80,701 square meters (868,600 square feet).

Located in the decentralized central business district (CBD) of Wujiaochang, Innov Center is valued at 3.1 billion yuan ($448 million).

CapitaLand, Singapore's largest property developer, previously formed a 50:50 joint venture with an unrelated third party to acquire 70% of Pufa Tower for about 2.8 billion yuan.

Pufa Tower, whose inclusion in CAP I is in the pipeline, is a 34-storey office development in Shanghai's Lujiazui CBD, of which CapitaLand and its joint venture partner own levels 8 to 19 and levels 21 to 32 with a total GFA of 41,773 square meters.

After asset enhancement initiatives and active leasing management, Lee Chee Koon, president and CEO of CapitaLand Group, said it has "meaningfully de-risked Innov Center" on behalf of CAP I investors, and will now transfer it to the fund from CapitaLand's balance sheet.

"Active and disciplined asset recycling is an important part of CapitaLand's strategy to enhance returns and to rejuvenate and rebalance our portfolio," said Lee. "To this end, we have set an annual divestment target of at least $3 billion."

He added that the acquisition of Ascendas-Singbridge will also strengthen CapitaLand's development pipeline, with the enlarged entity giving CapitaLand plenty of fuel for its fund management platform.

Citi Investment Research analyst Brandon Lee said year to date, the CapitaLand group has divested in Storhub, CapitaMall Wuhu and Ascott Raffles Place.

He expects the group to step up its capital recycling initiatives, including adding value-added assets in China, Singapore and Japan to CAP I, and adding income-producing stabilized properties in China, U.S. and Singapore to its listed real estate investment trust.

CapitaLand shares were up 0.3% or one cent at $3.25 as at 10.57am.

Contact editor Yang Ge (geyang@caixin.com)