Allianz Real Estate, the German insurer’s real estate asset and investment manager, has partnered with TH Real Estate to invest $225 million equity in a China outlet mall fund.
ERES APAC II is a core-plus, closed-ended US dollar denominated fund through which TH Real Estate is targeting to raise $750 million in equity. The capital raise will be used to acquire two stabilized outlet malls – Florentia Village Jingjin and Florentia Village Shanghai. Allianz Real Estate is the anchor investor with a 30 percent ownership of the platform.
The commitment marks a continuation of Allianz Real Estate’s expansion into developing Asia or what the firm calls growth economies, which includes China, India and southeast Asia.
Rushabh Desai, Asia-Pacific chief executive at Allianz Real Estate told PERE that by the end of 2017, the firm would have €775 million in assets under management in China. In other words, the country would account for 40 percent of Allianz Real Estate’s total assets under management in Asia, which are estimated to touch €1.9 billion by the year-end. The insurer has also made investments in develop-to-core logistics assets in China
Desai added that while the insurer has invested in China’s retail sector through fund investments previously, this deal is effectively its active retail investment in the country.
“China is moving towards a services and domestic consumption led economy. Alongside the traditional ‘bricks and mortar’ retail formats, outlet malls have been successful in attracting buyers looking for branded products at discounted prices. RDM Asia has implemented a unique single point-of-sale operating model and has done an excellent job to stabilize the Jingjin and Shanghai assets,” he commented in an official statement.
“As part of its diversification strategy, Allianz is looking to build an institutional-grade portfolio of commercial and logistics assets in China. Co-investment in Shanghai’s Hongkou SOHO in August and now this fund have been part of this approach, and there will be more to come,” Desai added on the firm’s China investment strategy.
PERE understands that $550 million out of the $750 million target capital raise has already been locked in through commitments from a total of five institutional investors (including TH Real Estate’s commitment on behalf of TIAA).
The Hong Kong-based fund manager Gaw Capital Partners is also an investor in the platform. According to PERE’s earlier reports, Gaw Capital Partners was also announced as the co-capital sponsor for the vehicle when it was first launched in June, 2016.
The remaining equity is expected to be raised from one or two investors.
As per the current strategy, the fund will only hold these two assets. Gross returns of between 13 to 16 percent are being targeted from this value-add play.