Mirae buys 1b yuan Shanghai block

Korean equity fund acquires upmarket serviced apartments from Gateway Capital

Mirae Asset Financial Group, the largest equity fund manager in South Korea, has agreed to acquire Shama Luxe, an upmarket serviced apartment block in Shanghai, for about one billion yuan, according to sources.

One of the first big mainland property transactions this year, the purchase underlined continued interest in the market by foreign funds despite increased monetary controls and policy tightening, they added.

Mirae has agreed to pay the equivalent of about 62,000 yuan per square metre to Hong Kong fund Gateway Capital for Tower 18 in Lakeview Regency, the second phase of Xintiandi in Shanghai.

Known as Shama Luxe, the 31-storey serviced apartment block has a total gross floor area of 15,793 square metres and 100 apartments, according to Gateway Capital's website.

An executive of Mirae confirmed that the company was in talks to buy a serviced apartment block in Shanghai but would not say if the Shama deal had been clinched.

Gateway Capital, a property investment fund founded in 2005 by Hong Kong entrepreneurs Goodwin Gaw and Kenny Gaw, bought the tower from Shui On Land for about 600 million yuan through its first investment fund in the first quarter of 2006.

Gateway then converted the building into the Shama Luxe under the management of Shama - a serviced apartment chain partly owned by Gateway and Morgan Stanley.

'[The deal] shows that foreign funds are still interested in Shanghai, especially in its high-end residential market,' said Lina Wong, managing director of Colliers International's East China region. It was rare for a buyer to find a residential property offered en bloc in downtown Shanghai, as owners usually sold their properties in strata titles, she said.

Ms Wong said the Shanghai city government's earlier move to disallow foreign participation in a public auction for two prime sites in the city had further limited investment opportunities for foreign players.

Foreign investors were barred from bidding for the two residential sites in Luwan district last month in a move the authorities said was intended to prevent a flood of hot money from pushing up land prices.

With no foreign players taking part in the auction, the sites were sold to local developer Greenland Group at a price that was 66 per cent lower than expected.

'Investors continue to view the serviced apartment market as an important component of their portfolios, with opportunities for well-managed and distinctive properties in downtown areas and a strong and stable demand base,' said James Macdonald, senior manager of Savills' research department in China.

In September last year, Grosvenor, a London property investment group, acquired 28 units in Lakeville Regency from Shui On Land for 68,000 yuan per square metre. The investment group acquired Towers 6 and 7, both 14 storeys tall.

Colliers said the overall outlook for Shanghai's property market remained promising this year given solid market fundamentals and an expected boost from the city's hosting of the World Expo in 2010.

However, analysts said while foreign investors had become more vulnerable to policy changes, grade A offices and serviced flats would still be sought after by foreign buyers.

Gateway Capital manages two real estate funds - Gateway China Fund I and Gateway Capital Real Estate Fund II - with total equity commitments of more than US$800 million.

The sale represents the first exit of Gateway China Fund I from an investment.

Mirae has increased its investments in Hong Kong and the mainland, buying a 104-unit residential block at Cyberport's Bel-Air development for HK$1.86 billion from PCCW's Pacific Century Premium Developments in October last year. The purchase was its first in Hong Kong.