CapitaLand transfers interest in Shanghai buildings to maiden discretionary PE fund

A laborer walks in front of a CapitaLand logo at a construction site in Singapore. Photographer: Charles Pertwee/Getty Images

Singapore-listed real estate developer CapitaLand is divesting its interest in Shanghai’s Innov Center to CapitaLand Asia Partners I (CAP I), its maiden discretionary real estate equity fund, at an agreed property value of 3.1 billion yuan ($448 million).

In a statement, CapitaLand said the move to sell its interest in companies that hold Innov Center in Shanghai’s Yangpu District is part of its capital management strategy in China. The company has also set an annual divestment target of at least S$3 billion ($2.17 billion).

The deal is expected to be completed in the third quarter of this year and comes a month after CAP I raised $391 million for its first close. CapitaLand, which began fundraising last July, has secured commitments from institutional investors including pension funds, insurance companies and financial institutions from Asia and Europe for the fund.

Shanghai Innov Center is a predominantly office integrated development located in a technology-focused decentralised office market. CapitaLand acquired the property in 2017 to be the seed asset to kickstart its discretionary fund business, according to the group’s president and CEO Lee Chee Koon.

“Active and disciplined asset recycling is an important part of CapitaLand’s strategy to enhance returns and to rejuvenate and rebalance our portfolio,” Lee added.

CAP I will invest in value-add and transitional office buildings in Asia’s key gateway cities, specifically Singapore, Beijing, Guangzhou, Shanghai, Shenzhen, Osaka and Tokyo.

Other pipeline assets for CAP I include Pufa Tower, an office development in Shanghai’s prime Lujiazui CBD.

CAP I comes on the heels of the $556-million first closing of CapitaLand’s debut China-focused discretionary real estate debt fund, CREDO I China. The fund aims to raise $750 million to invest in offshore USD-denominated subordinated instruments for real estate in China’s first- and second-tier cities.