ROBUST leasing demand and a clearer picture of the yuan’s appreciation trend have sparked a buying spree for Shanghai’s high-end residential units among overseas investors who have mainly invested in the office sector last year.
Goldman Sachs Group Inc, the world’s second-largest securities firm, has acquired a serviced apartment complex in Hongqiao area for US$70 million from Fujita Corporation, a Japanese developer, sources familiar with the deal said. The 22-story Rainbow Plaza, located at the intersection of Tianshan Road and Gubei Road, has 270 units which are mainly occupied by Japanese tenants.
The daily rent for a unit is about 80 US cents per square meter. Goldman Sachs only took a few months to make the decision to acquire, which was finally clinched last month, as it is eager to buy in anticipation of a further appreciation of the yuan, the source said. Purchases involving an entire tower used to take one year or even longer to complete, industry analyst said.
Morgan Stanley, which has been the single largest global real estate investor in Shanghai, said on April 3 that it has acquired two serviced apartment projects in Shanghai and will announce the deal at the end of this month. Investors such as these would first hold the property for a period to earn profit from stable rents. When the yuan rises, they are expected to sell the properties for a profit from currency differences and increase in property value as well, analysts said.
The city’s high-end residences have seen strong leasing demand with China’s opening, bringing an influx of foreign expertise. Major financial institutions such as HSBC and Citigroup said they will send about 200 expatriates to Shanghai this year to take advantage of the opening of the nation’s financial industry. Shanghai Yefeng Real Estate Co, developer of Chateau Pinnacle, a luxury apartment project on Huashan Road near Xingguo Hotel, said it has been approached by almost all the overseas institutional funds that have been active in China’s real estate market for a potential purchase.