Banyan Tree closes China hospitality fund at $214m

The Banyan Tree China Hospitality Fund is the second private equity real estate fund to be closed by Banyan Tree Capital since its inception in 2007.

Singapore-listed hospitality and leisure real estate firm Banyan Tree has held a final closing for its Banyan Tree China Hospitality Fund. The firm said it raised $214 million for the RMB denominated fund, in an announcement today.

The fund was established to make equity investments in Chinese developments from which it can operate Banyan Tree hotels and resorts.

Ho Kwon Ping, executive chairman of Banyan Tree, said: “The China fund will further enable us to establish a portfolio of resorts and hotels in the fast developing economy of China, in line with expansion of our plans for Banyan Tree and Angsana-branded properties into this market.”

The fund is yet to deploy its equity but Zhang Li, the managing director of Banyan Tree’s Hong Kong office, told PERE in an interview last November that the fund had already identified a pipeline of investments. According to the announcement Banyan Tree has now stretched this pipeline to 18 assets.

Li said the fund would invest in second, third or fourth tier Chinese cities to help generate tourist destinations. He said the sector was currently benefiting from favourable government policy.

By denominating the fund in RMB, Banyan Tree was able to target Chinese entrepreneurs, employing a placement agent which specialises in allocating equity from such sources. In addition to third-party capital, the firm committed five percent of the fund’s equity itself.

Banyan Tree set up Banyan Tree Capital in 2007 to manage its funds division. To date, the China fund is the second fund it has launched following the Banyan Tree Indochina Hospitality fund, which closed in June 2009 on $283 million.