Lend Lease buys China office tower
Australian firm pays US$98m in latest foreign purchase of mainland property
Australia-based Lend Lease Global Properties has agreed to buy a 95 per cent stake in a Shanghai office tower for US$98 million in the latest high-profile acquisition of mainland property by foreign funds.
Betting that China's strong economic growth will boost demand and push rents and sale prices upward, overseas companies are extending their investment portfolios from residential to commercial property.
'The transaction indicates the strength of investor confidence in the market,' said Lina Wong Weng-lin, managing director of Colliers International's East China division, agent for the sale.
Lend Lease, through a fund managed by Macquarie Global Property Advisors, will buy the stake in Shanghai Xin Mao Property Development from Singapore-based CapitaLand.
The remaining 5 per cent stake is owned by a mainland party.
Shanghai Xin Mao owned an uncompleted 20-storey office tower on Taicang Road in Luwan district, said CapitaLand, a property development and investment firm.
The building, Xin Mao Tower, will have 32,200 square metres of space above ground, three basement levels and 142 parking slots when completed by December 21 this year.
'Overseas investment has continued to pour into Shanghai to take advantage of the fundamental benefits the city offers,' Ms Wong said.
Morgan Stanley Real Estate Fund and ING Real Estate Investment have already established footholds in the city.
Colliers predicts Grade A rentals will rise 6 per cent and capital values 10.5 per cent this year.
In the last quarter, the monthly premium and Grade A rentals averaged US$24 per square metre and capital values reached US$3,300 per square metre. Vacancy levels fell to 7.2 per cent from 10 per cent in the same period of 2003.
'We believe the vacancy rate will remain low this year. Increasing rents and prices will also guarantee a rewarding investment,' Ms Wong said.
CapitaLand president and chief executive Liew Mun Leong said his company sold the stake to realise capital gains as it expanded its China property portfolio. He estimates the gain from the sale at S$50 million ($238.42 million).
CapitaLand recently bought two Beijing shopping centres for about US$220 million and, in December, said it would invest US$120 million in a Sino-foreign joint venture to buy and run malls housing US retail giant Wal-Mart.
