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Pudong en-bloc realty deal ends drought

THE recent acquisition of POS Plaza in Pudong New Area by Shanghai Lujiazui (Group) Co has ended a drought for en-bloc deals in the city and is also noteworthy because it involved a domestic firm in such transactions.

The state-owned real estate giant, through two of its subsidiaries, acquired the 34-floor office building on Century Avenue from South Korea's POSCO Engineering & Construction Co for a total price of 1.76 billion yuan (US$257.68 million), Lujiazui Finance & Trade Zone Development Co, a listed subsidiary of the Lujiazui group, said in a statement to the Shanghai Stock Exchange on March 19.

"The deal has finally ended a long period of drought for en-bloc sales in the city since late last year," said Jim Yip, local director of investment at leading real estate services provider DTZ. "It was noteworthy that unlike many previous transactions, the latest deal was invested by a domestic firm."

In the past, the majority of en-bloc deals in Shanghai's real estate market has been dominated by overseas companies. Last year, overseas investors invested a total of 16.3 billion yuan in en-bloc property acquisitions in the city, a 26-percent decline from 2007, statistics by Jones Lang LaSalle showed in January.

"The central government has recently given the green light for domestic insurance companies to invest in real estate," Yip said. "The investment market will in the near future see a return of big domestic institutional investors as the law will likely be enacted later this year."

Albert Lau, managing director of Savills Property Services (Shanghai) Co, also predicted earlier that Chinese mainland investors, mainly large state-owned firms, as well as private funds from Hong Kong, Taiwan and Singapore may be more active in the city's property investment market as many global institutional investors have been hit by tighter credit pressure.

Property investments by overseas investors in Shanghai will fall this year, with en-bloc sales at only 5 billion yuan or about one-third of last year's total, DTZ predicted.


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