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Our reporters Fang Chao and Zhang Jiazhen reported from Shanghai

Amid the changes in the real estate market, multiple sources of capital are "bottom-fishing" Shanghai's core assets.

Recently, state-owned enterprises from many places have gone to Shanghai to buy buildings. Xinjiang state-owned assets acquired Shanghai Huaxu International Building (Plaza336), and Henan state-owned assets acquired Shanghai Xingguangyao Building. State-owned enterprises from Jiangsu Province, Zhejiang Province and other provinces in the Yangtze River Delta region have also purchased office buildings in Shanghai.

Since the end of last year, it has become common for private enterprises and individual investors to acquire Shanghai office buildings. For example, the "cement king" Jinfeng Cement bought the Bulgari Hotel Shanghai for 2.43 billion yuan, and the "coal boss" from Inner Mongolia spent more than 4 billion yuan to buy the three buildings of Shanghai's "top luxury" COFCO Seaview No. 1.

It is worth noting that many real estate companies in trouble, such as San Sheng Hongye, Xinxin Real Estate, and Longfor Group, have also chosen to sell their core assets such as headquarters buildings and self-owned properties in order to recover funds and release debt pressure, and technology companies have become new buyers.

"As a core first-tier city, Shanghai has unique advantages and attractiveness in economy, technology and finance, which makes investors confident in the market performance." Lei Hongqi, head of investment at a foreign real estate institution, told China Business News, "In the future, Shanghai's bulk transaction market is expected to continue to be active, especially in the current economic environment, asset restructuring and mergers and acquisitions will become the main driving force for market development."

The headquarters buildings of many real estate companies are filled with shelves

Among the domestic buyers of core assets in Shanghai, in addition to local state-owned enterprises, private enterprises and individual buyers are particularly active. Local private enterprises dubbed "cement kings" and "steel kings" by the media have spent tens of billions of yuan to purchase luxury hotels, mansions and office buildings in Shanghai.

The reporter found that while domestic buyers rushed to Shanghai to "buy at the bottom", private real estate developers are becoming one of the protagonists in the "dump sale" of core assets.

The Ali Assets website shows that on July 17, the second auction of "No. 974 Waima Road, Huangpu District, Shanghai, real estate and parking spaces and other real estate" ended. Shanghai Wanlong Commercial Management Co., Ltd. (hereinafter referred to as "Shanghai Wanlong") won the auction with the highest bid through public bidding, and the auction price was about 831 million yuan. According to Qichacha, Shanghai Wanlong was registered and established on June 17 this year, and an individual investor named Li Yan holds 100% of the shares.

The reporter noticed that the asset is called "Sansheng Hongye Building". Sansheng Hongye was once among the top 100 real estate companies, but it has encountered a liquidity crisis since 2019, and has been caught in a vortex of employee financial management failures, bond defaults, and stagnation of its project construction. At present, Sansheng Hongye's official website cannot be opened, and the registered phone number is also displayed as an invalid number.

In addition, the Shanghai headquarters office building of Xinxin Real Estate was also put up for auction recently. According to the JD auction platform, on July 19, the real estate at No. 173 Xinghong Road, Minhang District, Shanghai, owned by Shanghai Xinxin Yuanding Real Estate Development Co., Ltd., was auctioned as a whole with the current status and lease, but it failed to sell because no one bid.

Not only that, on June 7 this year, motor drive chip semiconductor company Fengchi Technology (688279.SH) issued an announcement stating that its wholly-owned subsidiary Fengchi Shanghai, which has a wholly-owned subsidiary Fengchi Semiconductor, intends to purchase the entire property located at No. 5, Lane 280, Linhong Road, Changning District, Shanghai from Shanghai Langchi.

According to Qichacha, the actual controller of Shanghai Langshen is Tian Ming, the founder of Landsea Holdings Group. According to public information, the above-mentioned property is called "Shanghai Landsea Green Center". The official website of Landsea Holdings Group shows that this is the company's office address in Shanghai. An article reprinted by Landsea Holdings' official microblog in 2019 also stated: "Shanghai Landsea Green Center is the headquarters office of Landsea Group."

"The Shanghai headquarters has been sold for a while." An insider of a business unit of Landsea Holdings Group recently told reporters. But after learning the identity of the reporter, he quickly changed his words and said "I don't know." The reporter then called the office phone number of Landsea Holdings Group's official website to verify, but found that it was no longer in service.

"The sale or auction of real estate companies' headquarters office buildings in Shanghai reflects the pressure brought about by the current real estate market adjustment. On the one hand, some real estate companies' financing channels are restricted and liquidity is tight, which has forced them to ease financial pressure by selling core assets. On the other hand, affected by the economic cycle, some companies are facing difficulties in their operations, which has also forced some office building assets that were originally used for self-use to enter the bulk transaction market." Lei Hongqi told reporters.

Optimistic about the investment potential of Shanghai market

Domestic buyers are in the limelight, and foreign buyers are also targeting Shanghai's high-quality commercial plazas and long-term rental apartment assets.

Nanxiang Impression City MEGA, the largest single commercial shopping center in Shanghai, has recently become the focus of the commercial real estate market due to equity changes. According to Qichacha, on June 7, the investor of Nanxiang Impression City MEGA project company Shanghai Xingxinman Enterprise Management Co., Ltd. (hereinafter referred to as "Xingxinman") changed, and the equity ratio of RECO YIYUAN PRIVATE LIMITED, a subsidiary of GIC (Singapore Government Investment Corporation), changed from 50% to 98%.

The equity ratio of Shenzhen Intime Management Co., Ltd. under Vanke was changed from 50% to 2%, and the corporate type of Xingxinman was also changed from "limited liability company (Sino-foreign joint venture)" to "limited liability company (foreign investment, non-sole proprietorship)".

Link REIT, known as "Asia's largest real estate investment trust fund with the largest market capitalization and highest trading volume", also acquired shares in Qibao Vanke Plaza this year.

In February this year, Link REIT announced that it had purchased the remaining 50% interest in Shanghai Qibao Vanke Plaza from Vanke for RMB 2.383 billion, becoming the full owner of the property. "The purchase price is based on the agreed property value of RMB 5.2 billion, and the final transaction value will be adjusted depending on potential third-party transactions." In July this year, Qibao Vanke Plaza was officially renamed Qibao Link REIT Plaza.

"Shopping malls have always been a major category of asset allocation around the world, and foreign capital values ​​the stability of Shanghai's commercial real estate market and its status as an international financial center." Lei Hongqi analyzed that the acquisition of commercial plazas is a reflection of foreign capital's optimism about the long-term development potential of China's consumer market. Such assets are located in prime locations, have high-quality tenants, can bring in stable cash flow, and can also avoid some of the risks brought about by fluctuations in the macro environment.

At the same time, foreign investors have also increased their investment in Shanghai's long-term rental apartment market. On April 25 this year, Tishman Speyer acquired a hotel project of Pengxin Group located in the core area of ​​Wujiaochang, Shanghai, and planned to transform the original hotel rooms into about 300 new long-term rental apartments. Tishman Speyer said that this move marked "official entry into Shanghai's high-end long-term rental apartment market."

Earlier in August 2023, Brookfield Asset Management, one of the world's largest alternative asset management companies, completed the acquisition of a rental residential project in Jing'an District, Shanghai. "Following the Shanghai Wujiaochang Bolin Hotel and Executive Apartments, Brookfield continues to expand its footprint in the rental residential sector in China," Brookfield Asset Management said.

"The main reason is that affordable rental housing and shopping centers are included in the scope of real estate investment trusts (REITs), which greatly improves the liquidity of assets and attracts more capital favor. In addition, mergers and acquisitions of rental assets have been one of the hottest tracks in recent years not only in Shanghai, but also in the global market." Lei Hongqi told reporters.

Premiums for quality assets are expected to increase

"Market sentiment is slowly recovering, and corporate buyers are actively interested in investing." According to CBRE statistics, in the first half of this year, 50 transactions were completed in the Shanghai property investment market, with a total transaction amount of 32.33 billion yuan, a slight decrease of 6.6% from the same period last year. However, it also believes that the investment attractiveness of Shanghai's core assets is becoming more and more prominent.

Although the total transaction volume has declined, domestic buyers have risen against the trend and become the "leaders" in Shanghai's bulk transaction market.

According to DTZ statistics, in the first half of this year, the total transaction amount and number of transactions in Shanghai's block trade market were 20.8 billion yuan and 32 respectively. The total transaction amount dropped by 42% compared with the first half of last year, a significant decline. Domestic buyers have become the main force in the market, accounting for about 78% of the total transaction amount and 90% of the number of transactions.

"From the perspective of buyer types, Shanghai's bulk transaction market is still dominated by domestic buyers recently. Some self-use buyers take this opportunity to acquire high-quality office buildings in Shanghai to integrate and expand office space. Affected by factors such as the slowdown in global economic growth and the Federal Reserve's interest rate hikes, foreign institutions' investment activities are relatively cautious." Cao Jingjing, general manager of the Index Research Department of China Index Academy, analyzed to reporters.

With domestic capital continuing to increase and foreign capital competing for the blue ocean market, what will be the future trend of the Shanghai bulk trading market?

"Although the investment pace of traditional real estate investors has slowed down slightly, there are still many large-scale transactions being carried out in an orderly manner. This also shows that many investors have firm expectations for the long-term improvement of Shanghai's large-scale transaction market." Wang Jing, head of investment and capital markets department of CBRE East China, believes.

"In the second half of this year, it is expected that Shanghai's office and shop leasing market will recover further, and the bulk transaction market is expected to maintain a certain level of activity. However, there is still room for asset prices to fall. Institutional investors, including insurance funds, may continue to pay attention to Shanghai's high-quality retail and long-term rental apartment assets, and there is also the possibility of large-scale transactions." Cao Jingjing further stated.

In Shanghai's blockbuster transactions, the number of investment buyers is increasing. According to CBRE statistics, in the first half of this year, corporate buyers accounted for half of the buyers of blockbuster transactions in Shanghai, and nearly 40% of the transactions were investment-oriented.

"The increase in investment buyers will intensify market competition and bring in more capital inflows, which will improve asset liquidity. At the same time, as investors pay more and more attention to asset quality and long-term returns, the market structure may be further optimized and the premium of high-quality assets will be further improved," Lei Hongqi analyzed.