(Source: CLI)
Singapore’s CapitaLand Investment (CLI) has sold its majority shareholding in a RMB 2.4 billion ($340 million) Beijing office building to AIA Life Insurance as the life insurer continues to snatch up properties amid mainland China’s real estate downturn.
CLI divested its 95 percent interest in Capital Square Beijing in Chaoyang district to AIA through a newly formed joint venture, according to a stock filing on Wednesday. The SGX-listed fund management arm of CapitaLand retained the remaining 5 percent stake in the asset along the Chinese capital’s North East Third Ring Road and will continue to provide asset management services for the property.
The divestment comes 15 months after CLI bought the office component of what was then known as Tower A of Borui Plaza through a court-arranged auction, a move that aligns with the Singapore giant’s shift to an asset-light strategy of managing third-party property investments, according to CLI China chief executive officer, Puah Tze Shyang.
For AIA, securing the grade A office asset as its first direct real estate investment in Beijing expands a portfolio of Chinese commercial real estate which it inaugurated with its RMB 5 billion acquisition of what is now the AIA Financial Center commercial complex in Shanghai’s North Bund in December 2022.
Core CBD Asset
The transaction values Capital Square Beijing at RMB 53,620 per square metre of its 44,759 square metres (481,782 square feet) of gross floor area, which is spread across levels four through 25 of the 25-storey building. CapitaLand had not picked up the retail podium which occupies the first three floors of the building in its earlier acquisition.
CLI China CEO Puah Tze Shyang
The latest valuation for the property represents a 17.6 percent increase from the RMB 2.04 billion which CLI paid to acquire the asset in October 2022 through an auction held on behalf of Xiamen International Bank. The lender had seized the asset from Yongjia Group in January 2021 after the mainland developer defaulted on its debt.
Puah said the JV marks CLI’s second partnership with AIA in China following the life insurer’s investment in one of his firm’s onshore renminbi funds in 2022.
“Despite a challenging fundraising and operating environment, we have successfully brought in AIA as a joint venture partner in Capital Square Beijing as part of our disciplined capital management,” Puah said in the statement. “[The JV] demonstrates the trust that capital partners have in our on-the-ground expertise to unlock value from our assets and deliver strong returns.”
Capital Square Beijing is located within Beijing’s core central business district about three kilometres (1.86 miles) north of the CCTV Headquarters and the China World Trade Center. It is also about a 10-minute walk from the Tuanjiehu subway station.
CLI last year upgraded the 2012-vintage asset to enhance its appearance and improve operational efficiency before launching the rebranded property late in 2023.
AIA is among the existing tenants in the building, together with American brewery Budweiser and Alibaba-backed parenting site Babytree.
Average rents for Grade A office space across Beijing fell 6.9 percent year-on-year to RMB 303.2 per square metre per month in the fourth quarter as citywide vacancy continued to climb to 20.4 percent by the end of 2023, according to Savills data.
AIA Bets Big on China
AIA, founded in Shanghai and now the largest insurer in Asia Pacific, said in a separate statement that its purchase of the Beijing office asset aligns with its strategy of investing in the local market to promote economic growth.
“AIA Life has once again made direct real estate acquisitions, demonstrating the company’s confidence and determination to adhere to “long-termism” and continue to invest in China,” the firm said. “AIA Life will continue to play the long-term and stable role of insurance funds and strive to support the high-quality development of China’s economy.”
The company said that it tapped its insurance liability reserves to fund the acquisition, which comes a half year after Mingtiandi revealed that the company had invested in a RMB 3.5 billion life science park fund managed by Shanghai’s DNE Group.
The single-asset fund holds the 88,688 square metre Shanghai Jinchuang Building in Shanghai’s Zhangjiang High Tech Park.
In December 2022, AIA spent RMB 5 billion to buy a 90 percent stake in a 230,568 square metre office and retail project in Shanghai’s Hongkou district from state-backed investment firm Shanghai Industrial Holdings, marking the insurer’s first major real estate acquisition in mainland China.
The 180-metre tall office tower officially launched as the AIA Financial Center in January of last year, which Zhang Xiaoyu, chief executive officer of AIA Life Insurance, touted as the “new landmark of the North Bund” with the firm intending to base part of its local team in the facility, according to a press statement at that time.
CapitaLand’s China Asset Disposals
The latest asset share sale brings CLI’s divestments in China to RMB 3 billion over the past year, including CapitaLand China Trust, which is managed by a unit of the company, last month agreeing to sell CapitaMall Shuangjing in Beijjing to an Inner Mongolian investor for RMB 849.2 million.
In February 2023, CLI sold a logistics development in Foshan in southern China’s Guangdong province for S$157 million (then $117.2 million), with the property serving as the seed asset for its CapitaLand China Opportunistic Partners Programme.
CLI had S$47 billion in real estate assets under management in China as of the end of 2022.