The EC Mall shopping center in Beijing has been sold to Asia’s largest REIT after an exclusivity period agreed with a joint venture between Korea’s public pension, National Pension Service, and Washington DC-based private equity firm The Carlyle, expired.
NPS and Carlyle entered into exclusivity to buy the 600,000 square foot mall from private real estate and infrastructure firm InfraRed Capital Partners and Singapore-based property firm Metro Group in a deal valued at RMB2.4 billion (€355 million; $386 million) last November.
However, after the joint venture failed to complete the transaction before the exclusivity period lapsed, Hong Kong-listed retail property REIT, Link REIT, swooped in to buy it for RMB2.5 billion, meaning sellers InfraRed and Metro will book a higher return than expected.
The transaction, which reflected a yield of approximately 4 percent, will provide InfraRed’s first China fund, which was used to make the original investment, with an IRR of about 20 percent and an equity multiple of more than 2x.
InfraRed purchased its position in the mall, about 50 percent, via its InfraRed NF China Fund I, which was closed on $707 million in 2007.
The EC Mall is something of a core property asset now, although there is understood to still be potential to drive value creation. The asset is 95 percent leased, but with some leases due to expire shortly, there is the potential to increase rents by as much as 15 percent, PERE understands.
That would come after the asset management already done by InfraRed has seen the mall’s income grow by three times since its opening in 2009. During that time, it is understood the center’s footfall has increased by five times.
The Link REIT is Asia’s largest REIT with a market capitalization of HK$108.4 billion (€12.9 billion; $13.9 billion). It was listed on the Hang Seng index in 2005 and has since grown to control a portfolio of retail and car parks assets comprising 11 million square feet of leasable space.
DTZ advised InfraRed and Metro on the sale.