Rob Speyer is not surprised that the biggest transaction in his company’s 43-year history was executed in China. He’s also not surprised the other party is a nine-year-old social media company.
ByteDance, the parent company of the video-sharing platform TikTok, agreed last week to take 2.55 million square feet of office and retail space at The Springs, Tishman Speyer’s massive Shanghai mixed-use development complex. Speyer, the firm’s president and chief executive, said the agreement is the New York company’s largest transaction on a square-foot basis “by a multiple.”
“I’m not surprised it happened in China or that it happened with TikTok,” Speyer told PERE. “China has been the anchor of our global business since we arrived there in 2006, and we’ve spent the past 10 years driving the company toward the intersection of tech and real estate.”
The transaction is part lease and part sale. ByteDance has agreed to lease 457,000 square feet of existing office space while it waits for the completion of 2.1 million square feet of additional space, which it will purchase. The location will serve as the company’s regional headquarters.
The companies declined to disclose a sale price for the transaction. Speyer said this is because the property is still under construction. The development value for the parcel is $1.25 billion, he noted, and the new ByteDance regional headquarters is expected to be complete by the end of 2023.
Tishman Speyer had previously secured several large multinational companies as tenants at The Springs, including Nike, Continental AG and Henkel. But Speyer said the commitment by ByteDance demonstrates the property’s appeal to tech tenants, which he sees as a key growth segment in China.
“We wanted this project to be a model for how innovators could use our real estate to foster collaboration and generate the next generation of technology,” he said.
Tishman in China
In 2007, Tishman Speyer became the first US company to launch a China-focused fund, Tishman Speyer China Fund, which closed on $884 million. Five years later, it was the first foreign group to close a Chinese yuan-denominated fund for domestic investors, raising 1.2 billion yuan ($185 million; €156 million). It has since closed six more renminbi funds, Speyer said.
Tishman Speyer raises both blind-pool capital and deal-by-deal vehicles, Speyer said. Its seven renminbi funds were a mix of both. It counts financial institutions, insurance companies, high-net-worth individuals and state-owned enterprises among its investors.
In 2011, the firm acquired a 100-acre former military airfield in Shanghai’s Yangpu District in a local government auction. That site is now home to The Springs development, which includes hotels, retail and offices as well as a 33-acre ecological preserve. The project is roughly 50 percent complete, with the ByteDance properties poised to bring it to nearly 75 percent.
Negotiations with ByteDance were in the works for more than a year, Speyer said, meaning they took place when US-China relations were at their lowest. In August 2020, then-president Donald Trump attempted to ban TikTok from the US, citing security concerns. But Speyer said government hostilities have not impacted his company’s business interests. “We’ve had a great experience in China and we’re very optimistic about the future,” he said.
Local dealings
While Tishman Speyer’s sale and lease to ByteDance is its largest to date, the transaction is not the only noteworthy Chinese exit for the firm.
Last year, it sold a tower in its 3.3 million-square-foot Crystal Plaza development – also located in Shanghai – to the Chinese cosmetics brand Tin’s Secret for 1.76 billion yuan. It previously sold a portion of the complex to energy company in 2018 for 1.5 billion yuan.
Along with its Shanghai investments, Speyer has projects in other major Chinese cities. In Shenzhen, it is building an office complex for the Chinese computer maker Lenovo. In Beijing, it is redeveloping a defunct steel mill into a mixed-use site with lodging and retail ahead of the 2022 Winter Olympics, and it is converting an extended stay hotel into condominiums.
“There is room for multiple gateway cities in China,” Speyer said, pointing to Chengdu, Beijing, Shanghai and Shenzhen as growing regions.
Network effect
In 2012, shortly after acquiring the rights to The Springs site, Tishman Speyer got a much-needed endorsement for the project. Nike signed a 600,000-square-foot lease to make the property its Chinese headquarters.
Speyer said Nike is one of his firm’s longest-standing tenants, tracing the relationship back to New York City in the 1990s. He said this is an example of the Tishman Speyer’s network effect, and he hopes a similar dynamic will play out for ByteDance and other Chinese tech companies interested in global expansion.
“We’ve embraced technology and it’s given us a roadmap for how to change our business,” he said. “We’ve been directing the company over the past 10 years to be involved with companies like TikTok, and as they look to expand to other markets, we’re there to support that growth. That’s essential to our business model.”
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