According to George Agethen, head of capital raising and business development at Hong Kong-based private equity real estate firm Harvest Capital, a pipeline of deals played a key part in enticing investors to make $327 million in capital commitments to the firm’s new development fund.
Launched in January, it has taken little time for Harvest, majority-owned by state-owned China Resources, to seriously eat into its $500 million capital raising target. Agethen believes it is the fund’s pre-identified pipeline of retail malls that has proved decisive in attracting commitments.
“This way, investors know what they are investing in,” he said. “There have been some very good managers with retail strategies for China but their problem has been in finding stock. We have already demonstrated a capability to do that.”
Harvest’s six-year CR China Retail Real Estate Development Fund will acquire assets developed by another China Resources company, Shenzhen-based SZITIC Commercial Property, a developer which has completed 28 malls in China in its time and is a shareholder of US retail giant Walmart’s China arm.
The development fund, which is targeting a return of more than 20 percent IRR and will deploy equity at no more than 50 percent loan-to-value, was launched alongside a fund targeting income-producing assets called the CR China Retail Real Estate Income Fund. That vehicle is targeting $300 million in equity and is expected to provide a return of between 12 percent and 15 percent. According to Agethen, an equity closing on the vehicle is expected shortly.
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