LaSalle acquires Shanghai apartments from Landsea

The Huangxing building has already been converted from office to residential use

An opportunistic fund managed by LaSalle Investment Management is acquiring a building in Shanghai’s Yangpu district from Landsea Green Management Limited for RMB253 million ($35.2 million), with market sources expecting the company American is renovating the property for use as rental apartments.

LaSalle Asia Opportunity VI LP has agreed to buy a 100% stake in a Landsea subsidiary that owns the Shanghai Huangxing Building, Landsea said in a deposit on the Hong Kong Stock Exchange late last month, the purchase marking the investment manager’s second residential rental project in China’s commercial capital.

LaSalle is paying 102.5 million RMB ($14.1 million) in cash to take over the 22-story tower, which was valued at RMB 253 million in September by an independent third party. As part of the deal, the fund manager is also taking over the project company’s debt of RMB 150.5 million, according to Landsea’s statement. The mainland developer said it would book a loss of RMB 56.5 million on the sale.

A market source familiar with the transaction told Mingtiandi that LaSalle, the Chicago-based subsidiary of real estate consultancy JLL, will likely redevelop the property and manage it as residential rental units. The building that once housed the China Pacific Insurance Group office has already been converted into apartments and is believed to be currently vacant, the source said.

East Bund Access

Located at 18 Huangxing Road in Yangpu District, Huangxing Building covers a total area of ​​11,427 square meters (123,000 square feet) and is located right next to the inner ring road.which is the limit of the central area of ​​the cityand about a three-minute walk from Ningguo Road Station on the 12 subway line.

Claire Tang, Co-CIO, Asia-Pacific and Head of Greater China, LaSalle Investment Management

LaSalle is paying the equivalent of 22,140 RMB per square meter for the 2005 vintage building, which a market source says is “a reasonable price for this location.” LaSalle declined to comment on the transaction.

Landsea’s statement showed that the project suffered a net loss after tax of RMB 2.6 million last year, compared to a net profit of RMB 121,258.
in 2020.

The site is just over 2 kilometers (1.25 miles) inland from the Yangpu Bridge spanning the Huangpu River to Pudong and near the East Bund area of ​​Yangpu District. Food delivery giant Meituan and video streaming platform Bilibili have both acquired sites in the East Bund to build their offices.

“The East Bund area has attracted large technology-related companies as well as a number of start-ups. The region will continue to see further business development in the future and is expected to reach full business maturity by then, Shaun Brodie, senior manager of Cushman & Wakefield Greater China, told Mingtiandi.

The rent for a 60 square meter one-bedroom apartment in the area is around RMB 7,500 per month, Brodie said.

Struggling continental developer

“The group is primarily engaged in the development and sale of properties in the PRC and the United States. Holding investment properties and therefore earning rental income is not a major development direction for the company in the future,” Landsea noted in its statement. The company added that the asset disposal will help it strengthen its cash flow.

Real mix project rendering shanghai lasalle jingrui

LaSalle completed its first residential rental project in Shanghai in 2021

Like many other mainland Chinese developers, Landsea has delayed debt repayment due to a cash crunch.

Ranked 135th among Chinese manufacturers by contract sales attributable to shareholders in the first nine months of this year, Landsea Green last month agreement reached from investors holding 78% principal of $170m offshore bond maturing Oct. 21 for new tickets maturing in October next year.

The bond represented around 15% of Landsea’s total debt as of June 30, according to Moody’s, with the rating agency having already downgraded Landsea’s family of companies’ rating to Caa1 from B3 last month. “Moody’s believes Landsea’s low liquidity is insufficient to meet its repayment needs,” company analysts said at the time.

As China’s housing market continued to decline throughout this year, LandSea Green suffered along with the rest of the industry. The Nanjing-based developer’s contract sales in the first nine months of this year were down 49.7% from the same period in 2021, according to the company’s unaudited operating statistics.

With sales evaporating, the beleaguered developer scrambled to raise cash through the sale of assets.

Late August, Landsea sold a 50% stake in the Beijing shipbuilding project to Sunshine Insurance Group for 137.6 million RMB, recording a loss of 11.9 million RMB.

End of May, Landsea sold a 10.7% stake in its Nasdaq-listed US subsidiary Landsea Homes for $45 million to a major shareholder under a “quasi-equity, real debt” deal with 10% annual interest.

In mid-May, Landsea sold its entire equity in a 5,730 square meter apartment project in Nanjing for 85.5 million RMB.

The rental is coming to town

The value of LaSalle’s Yangpu price comes from the growth of the rental housing sector in China, as house prices in major cities across the country become among the least affordable in the world.

Claire Tang, co-chief investment officer for Asia-Pacific and head of Greater China at LaSalle Investment Management, sees great potential in the Chinese multifamily sector.

“I think in the Chinese context, it certainly has the scale to be the biggest in Asia or the biggest in the world in terms of an asset class, but there’s still a long way to go,” he said. said Tang. during an online panel discussion on MTD TV in March.

“What’s happening is that young people are renting longer before buying houses in Beijing and Shanghai. In Beijing and Shanghai, the price of housing is between 30 and 40 times the amount of the average income… On the capital market side, there has been a lot of demand for investment in multifamily because of the relative resilience of which this sector has shown throughout Covid, ”said Tang de LaSalle.

Last year, LaSalle and Shanghai-based developer Jingrui Holdings acquired commercial and hotel property in the Hongqiao area of ​​the megacity for 438 million RMB ($68 million) with plans to convert the asset into a rental apartment project.

Brookfield is also tapping into the potential of China’s rental housing market and the financial distress of some of the country’s biggest developers. Canadian fund manager Brookfield in September purchased a serviced apartment project in Yangpu district for 1.26 billion RMB ($180 million) from Guangzhou R&F Group and KWG Group Holdings.

The room announced in September that it had raised more than $2.2 billion in equity capital for LaSalle Asia Opportunity VI, this committed capital providing the company with investment capacity to acquire more than $7 billion in assets in key markets from Asia-Pacific, including Australia, China, Hong Kong, Japan and Korea and Singapore.

Comments are closed.