PE shells out $283m for office building

Go High Fund, a Beijing-based yuan-denominated private equity fund, said on Monday it had acquired an office building from MCC (China Metallurgical Group Corp) Real Estate for nearly 1.9 billion yuan ($283 million), making it the largest en-bloc deal in Beijing this year.

"We've signed the deal with MCC Real Estate," said Gao Xin, chairman of Go High Fund, but he declined to reveal its exact value.

The project, Jin'ao Guojin, is located on Beijing's North Third Ring Road.

Developed by MCC Real Estate, the real estate arm of State-owned MCC Group, it has a floor space of 140,000 square meters, with serviced apartments accounting for 50,000 sq m, office buildings taking up 60,000 sq m and the remaining 20,000 sq m for the retail sector.

"Given the market price, the value of the deal should be around 1.9 billion yuan," a source close to the deal told China Daily.

Established in 2009, Go High Fund is a private equity fund specializing in commercial property investment. Su Xin, the fund's chairman, had served as chief operating officer of commercial property developer SOHO China for 11 years.

Due to the government's continued tightening policies, more investors are focusing on the commercial real estate sector.

According to United States-headquartered real estate service provider Jones Lang Lasalle (JLL), China's commercial property sector is expected to maintain rapid growth, with rental prices continuing their upward momentum in the fourth quarter.

In September, Hong Kong-based Citic Capital Holdings Ltd invested 1.5 billion yuan in a commercial property project in Changsha, Hunan province. Everbright Ashmore (Beijing) Real Estate Investment Consultancy Co Ltd, the property investment arm of Hong Kong-headquartered China Everbright Ltd, invested $25 million in a commercial project in Chongqing.

Meanwhile, major property developers are also stepping up their involvement in the commercial sector.

On Oct 15, Vanke announced it had acquired Yingjia Center for 1.15 billion yuan, the second-largest en-bloc deal in Beijing this year, while Vanke has invested around 26 billion yuan in the commercial sector this year.

Longfor, another Hong Kong-listed property developer, is also keen to tap into the commercial property sector.

According to He Changchun, head of research at Longfor Properties, the company plans to have 30 commercial properties by 2014, which are expected to account for 15 to 20 percent of its overall business portfolio.

"Compared with the residential sector, the commercial property is not so volatile," said He. "In a sluggish market, people may suspend house purchases but will not stop shopping."

Source: China Daily