Rodamco Asia N.V. announced today that it has agreed to acquire Somerset Grand Shanghai, the first purpose built serviced apartment complex in the Luwan District, a prime area within the Central Business District of Shanghai, China.
SGS will be acquired through the purchase of 100% of the shares of the company owning the property, being Shanghai Yong Liang Real Estate Development Co., Ltd. (Â'SYLÂ'), which is a joint venture company of The Ascott Group, an international serviced residence company, headquartered in Singapore (interest of 72% in SYL) and a Chinese property development company (interest of 28% in SYL). The total investment consideration for the property (including transaction costs) amounts to e89.0 (USD 83.4) million. Of the total investment e48.0 (USD 45.0) million will be financed through bank loans and RAÂ's equity investment is therefore e41.0 (USD 38.4) million, of which e30 million will be payable 12 months from completion of the transaction. This will take place after the necessary regulatory approvals have been obtained, which is expected to be by end June 2002.
The initial net rental yield of the property is about 7.5%. As a result of this transaction RAÂ's net profit for the current financial year 2002/2003 is expected to be positively impacted by about e2.0 million.
SGS is well-located on Jinan Road in Luwan District, the traditional CBD of Shanghai. It is adjacent to Huaihai Park and in its vicinity are a metro station, upmarket retail shops, prominent commercial buildings as well as the new tourist attraction called Xintiandi. This trendy place features restaurants, retail, commercial and residential facilities in restored houses of unique old Shanghai architecture as well as the largest (40,000 m2) downtown man-made lake in Shanghai.
SGS is a twin tower complex with two 27-storey serviced apartment towers (height 99.8 metres each) connected by a footbridge on the second level. The 334 units in the complex, which range in size to cater to tenant diversity, are divided into the East Tower (opened since October 1998) and the West Tower (opened since April 1999). The total serviced apartment area is approximately 39,200 m2. Retail shops, an indoor swimming pool, a clubhouse and an outdoor tennis court are all located on the first and second level of the West Tower podium. These areas in total account for about 5,230 m2. The complex has 171 parking spaces. Currently, the occupancy rate for the complex is over 90%.
The Ascott Group, which is the serviced residence arm of the Singapore listed property company CapitaLand Limited, is the manager for SGS and it will continue to manage SGS for RA for a period of 5 years. After that, the contract is renewable for another 5 years on mutually agreed terms.
The Chinese economy grew 7.3% in 2001. As a result of ChinaÂ's accession to the World Trade Organization (Â'WTOÂ') in December 2001, growth is expected to remain at or above the 7.0% level in the following years. Shanghai, as an individual city, has achieved a growth of around 10% p.a. for the past 4 years and is expected to continue to grow at a rate above the average for the country.
Ton de Boer, Chief Executive Officer of Rodamco Asia said, 'This wholly owned investment is in line with our near-term plan to focus more on the Northern part of Asia, namely China and South Korea. Following the recently announced acquisition of the retail mall in Seoul and taking into account the commitments to complete its development, this transaction in Shanghai results in us having reached the near term target of a portfolio exceeding e1 billion. We are very pleased with the many merits of SGS: the brand name, the unique location, the apartment layout, its command of one of the highest rental rates within its class and that more than 60% of the leases are up for (positive) renewal this year.'
(source: Rodam Asia)