EXCLUSIVE: NPS in RMB2.4 billion Beijing mall buy

South Korea’s preeminent institutional real estate investor and its partner, The Carlyle Group, are understood to have beaten out competition from CalPERS and ARA Asset Management as well as ADIA and Macquarie to buy the 600,000 square foot EC Mall.

South Korea’s preeminent institutional real estate investor, the National Pension Service (NPS) of Korea, has entered into exclusivity to acquire one of Beijing’s most prominent shopping malls, PERE can reveal.

NPS is expected to purchase the EC Mall in Beijing, a near 600,000 square foot mall home to 91 tenants, from a partnership between private real estate and infrastructure investment manager InfraRed Capital Partners and Singapore-based property firm Metro Group in a deal believed to be valued at RMB2.4 billion (€314 million; $391.5 million). 

The transaction, which is expected to conclude at the turn of the year, would reflect a yield of approximately 4 percent based on the mall’s annual income of more than RMB120 per year.

NPS is acquiring the EC Mall via an investment mandate it awarded to New York private equity firm The Carlyle Group in 2013. 

They are understood to have beaten out competition from other institutional investor/fund manager partnerships including US pension California Public Employees’ Retirement System with Singapore-based ARA Asset Management and United Arab Emirates’ sovereign wealth fund Abu Dhabi Investment Authority with Australia’s Macquarie Bank.

NPS’ mandate with Carlyle was for $500 million of equity to be deployed via core-plus and value-added strategies. 

This purchase would meet that requirement as it is thought Carlyle would have the opportunity to add meaningful value via rental increases and tenant repositioning. The property currently is 95 percent occupied. But with certain leases soon to expire and an average rental hike of 15 percent per year, there is scope to improve its value further.

Despite this further potential, InfraRed is understood still to be on course to hit its opportunistic 20 percent IRR and 2x equity return target from its half-share of the asset. 

Originally acquired on behalf of its 2007, $707 million InfraRed NF China Fund I, the sale of the EC Mall will go a long way to helping the firm return the original equity of the fund back to its investors. Indeed, PERE understands that between that and the sale of a portfolio of six Tesco-anchored retail assets developed in conjunction with, and to be sold back to, the UK retailer, InfraRed will have exited from 10 of the 12 assets held in the fund.

The Tesco assets accounted for about $140 million of the fund’s original equity. Their pricing is thought to currently be underway ahead of the sale completing next month.

According to a marketing document obtained by PERE DTZ was instructed by InfraRed and Metro to sell the EC Mall. 

None of the parties involved would comment.