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Peggy Sito

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.



Lend Lease buys China office tower