The American company is reportedly offloading its final significant property in the city, Trinity Place, for approximately 900 million yuan (US$124 million).
The biggest asset management company globally
BlackRock
is offloading its final significant asset in Shanghai at roughly two-thirds of the original purchase price, as it withdraws from China’s struggling real estate sector.
The American company is looking to sell Trinity Place, a 27-story office building located at Changshou Road within the Putuo District of Shanghai, for approximately 900 million yuan (about US$124 million). This information comes from individuals close to the situation. According to calculations derived from an exchange filing reviewed by the Post, this sale price represents a decrease of about 34% compared to what they originally spent when acquiring the property—then known as Central Park—from Hong Kong Shanghai Alliance Holdings back in 2017.
Previously, BlackRock lost two office buildings in Shanghai’s Waterfront Place commercial area when they failed to repay an $113 million syndicated loan. These properties are currently being sold to DCL Investments, which specializes in troubled assets, for 700 million yuan. According to Bloomberg reports, this sale price reflects over a 40% decrease compared to what was paid back in 2018.
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Despite the ongoing national decline in property values weighing down investment returns, BlackRock isn’t alone in reducing its stake in China’s market. In 2024, foreign investors continued their trend as net sellers of Chinese real estate for another consecutive year, purchasing merely $5.9 billion worth of offices, hotels, industrial spaces, and retail properties—the smallest amount since 2014—according to data from MSCI.
BlackRock, following a US$23 billion agreement made not long ago,
buy global port assets
from Hong Kong’s
CK Hutchison Holdings
, has not engaged in significant asset transactions in China during the last five years, as per data from Cushman & Wakefield.
In 2017 and 2018, investment from abroad into China’s commercial real estate sector, notably office spaces, was highly sought after according to Ted Li, who serves as the senior director and head of capital markets for northern China at Savills. However, these properties are currently facing severe challenges due to falling rental incomes and substantially lower occupancies. Additionally, there has been a notable reduction in their total asset values.
Many owners are in a rush to sell due to a combination of factors, including the limited investment horizon and rising refinancing costs, even when the overall market is underperforming, he said.
A move initiated by the Chinese government in late 2020 to reduce leverage among developers resulted in a prolonged downturn within China’s real estate market. This decline has hindered economic expansion and reduced rental income. Amid ongoing business challenges including shutdowns and job cuts, office vacancies in key Chinese metropolitan areas have hit record highs.
dangerous
Savills, a consultancy firm, stated in February that it could increase by an additional 3.2 percentage points, reaching a level of 20 percent this year.
Nationwide office rental prices are anticipated to decrease by an additional 10% this year, according to a report released by property consultancy JLL on Thursday. The firm also stated that between 3.5 and 3.9 million square meters (approximately 37.7 million to 42 million square feet) of new office space will likely be added to the market, whereas only about up to 2.2 million square meters are forecasted to be absorbed.
BlackRock started pulling back from China earlier. According to reports in December, the investment firm omitted mainland China and Hong Kong from its sixth Asian real estate fund, aiming for $1.5 billion, with plans to finalize its initial closing this year, as mentioned by Private Equity International. It was the company’s first such omission; however, they stated they might still look into selective office investments.
In December 2023, John Saunders, the head of real estate for the Asia-Pacific region at this firm, departed to become the chief investment officer at Hong Kong’s Link Real Estate Investment Trust. Saunders had overseen the unprofitable acquisition of Trinity Place. Earlier in September, his replacement at BlackRock, Hamish MacDonald, informed Bloomberg that they were still far from making actual investments in China due to worries about liquidity.
The American investment company, managing $11.6 trillion in assets, decided to withdraw its private fund registration in China in 2021 after operating for only three years, shifting its emphasis towards its mutual-fund operations instead.
A group headed by BlackRock disclosed a major deal to purchase port facilities across 23 nations such as Panama.
CK Hutchison
On March 4, however, the agreement is encountering resistance from Beijing.
The highest authorities responsible for managing Hong Kong matters have
Three times indicated the central government’s dissatisfaction.
By republishing on their websites newspaper articles implying that the deal would harm national interests, the Post mentioned on Thursday about the tycoon.
Li Ka-shing
‘s CK Hutchison and the Hong Kong government were
discussing “a reasonable way out”
with a week to go until the deadline for the controversial deal.
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The article initially appeared on the South China Morning Post (www.scmp.com), which is the premier source for news coverage of China and Asia.
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