CapitaLand will divest two Shanghai properties - Innov Centre and Pufa Tower - and inject both into its maiden discretionary real estate equity fund, CapitaLand Asia Partners I (CAP I), as seed assets.

Innov Centre comprises three office buildings and a two-storey retail podium with a total gross floor area (GFA) of 80,701 sq m.

Located in the business district of Wujiaochang, it is valued at 3.1 billion yuan (S$618 million).

CapitaLand, Singapore's largest property developer, had previously formed a 50:50 joint venture with an unrelated third party to acquire 70 per cent of Pufa Tower for about 2.8 billion yuan.

Pufa Tower - whose inclusion in CAP I is in the pipeline - is a 34-storey office development in Shanghai's Lujiazui central business district. CapitaLand and its joint venture partner own levels 8 to 19 and levels 21 to 32, with a total GFA of 41,773 sq m.

CapitaLand president and group chief executive Lee Chee Koon said that after asset enhancement and active leasing management, the group has "meaningfully de-risked Innov Centre" on behalf of CAP I investors and will transfer it to the fund from CapitaLand's balance sheet.

"Active and disciplined asset recycling is an important part of CapitaLand's strategy to enhance returns and to rejuvenate and rebalance our portfolio," said Mr Lee.

"To this end, we have set an annual divestment target of at least $3 billion."

He said that the acquisition of Ascendas-Singbridge will strengthen CapitaLand's development pipeline, with the enlarged entity giving CapitaLand plenty of fuel for its fund management platform.

Citi Investment Research analyst Brandon Lee said that in the year to date, CapitaLand has divested StorHub, CapitaMall Wuhu and Ascott Raffles Place.

He expects the group to step up its capital recycling initiatives. These include adding assets in China, Singapore and Japan to CAP I; as well as adding income-producing stabilised properties in China, the United States and Singapore to its listed Reits.