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Jones Lang LaSalle (NYSE: JLL), the leading global real estate services firm, announced today that it has helped ARA Asia Dragon Fund (“ADF”) conclude the en-bloc sale of Nanjing International Finance Center (“Nanjing IFC”) to SanPower Group, one the largest diversified private enterprises in Jiangsu province, for a total transaction value of RMB 2.48 billion. This transaction marked the largest en-bloc deal ever for a stabilized commercial asset in the Yangtze River Delta (YRD) region, excluding Shanghai.ADF is a pan-Asian opportunistic fund managed by Singapore-listed ARA Asset Management Limited, one of the leading real estate fund managers in Asia. When ADF acquired Nanjing IFC in December 2008, at the height of the Global Financial Crisis, the property was newly completed and vacant. After a revamp of the retail podium, and a successful positioning and marketing of the property, Nanjing IFC became a premier office cum retail destination for leading multinational and major domestic enterprises.Nanjing IFC is a landmark mixed-use project located in the core area of Xinjiekou business district, the most mature business area in Nanjing. Its total GFA covers 109,000 sqm, including 72,686-sqm of office, 27,503.9-sqm of retail and 292 underground car parking spaces. The occupancy rate of the office portion exceeds 98%, with major domestic and international anchor tenants, including AstraZeneca, MetLife Insurance, Texas Instruments, State Grid Corporation of China and Ping An Insurance. Meanwhile, the retail portion is also fully occupied, with a large contribution by F&B retailers. As one of the most important hub cities in the YRD region and the provincial capital of Jiangsu province, Nanjing has seen strong economic development over the past several years, especially in the service sector. The tertiary sector’s contribution to the local economy rose from 50.7% in 2010 to 53.4% in 2012. The sector’s strong growth drove robust demand for office space in the city. Office net take-up reached 193,000 sqm between 2011 and 2013, 20% higher than the period between 2008 and 2010. Office rents also increased by 19% over the last three years, driven by stable leasing demand together with strong owner-occupier demand. Looking forward, there will be a supply surge in the emerging Hexi area, which will limit the speed of rental growth. However, landlords in Xinjiekou are expected to maintain strong pricing power as future supply will be limited in this submarket in the medium to long term. In the investment market, similar to other Tier 1.5 and Tier 2 cities, there have been historically few en-bloc transactions. The Nanjing IFC transaction is now marked as the largest en-bloc deal for a stabilized commercial asset in the YRD region, excluding Shanghai. With sustained strong demand and steadily rising rents, we believe that more investors will show increasing interest in office assets in Nanjing, particularly in the city’s core locations. These players will include foreign institutional funds, domestic insurance and other large domestic companies. As part of Nanjing’s office evolution, the increasing level of investment activities is expected to take the city’s office market one step further toward maturity.
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