CDH Investments, the China-focused private equity firm, has increased its real estate offering by absorbing the real estate team of domestic competitor Prax Capital.
PERE can reveal the Prax real estate team, led by Jason Zhang, Gan Meilan and six other professionals joined CDH last month.
The team is based in Shanghai and is focused on investments in industrial and other commercial real estate. Their next employment is part of a push by CDH to capitalize on the Chinese government’s strategic emphasis on a consumer-driven economy by investing in consumption-related real estate like logistics distribution warehouses.
The Prax team will operate separately from CDH Investments’ existing real estate team of 18 executives, based in Beijing, that is focused on equity and mezzanine debt investments in residential and commercial property. The incoming team is expected to bring with it the management of two, fully-invested real estate funds raised and deployed while at Prax which will stay invested.
Prax was raising a third real estate fund with a target of $350 million which it launched in 2011 and for which it held a $35 million first close in Q1 2012. However, it is understood that the challenging fundraising environment at the time, which effectuated a general malaise in the marketplace, led to a decision by the firm to discontinue fundraising, and invest only the capital it had raised.
The spin-out by the Prax team was understood to have happened in amicable circumstances, enabling Prax to focus entirely on its private equity business with no hangover from its exposure to real estate. Indeed, Prax’s investors are understood to have been aware of the move for some time.
Founded in 2003 as a private equity firm focused on China, Prax has offices in Hong Kong and Shanghai with assets under management totaling $800 million.
CDH Investments is a larger, domestic Chinese fund manager but also best known for its private equity activities. Established in 2002, it manages more than $12 billion of assets for more than 100 international and domestic investors, including sovereign wealth funds, China’s National Social Security Fund, pension funds, endowments, family offices and funds of funds. It operates from offices in Hong Kong, Beijing, Shanghai, Singapore, Shenzhen and Jakarta.
The firm completed its first real estate transaction in 2006 and formed a dedicated real estate team, based in Beijing, a year later. Since then, CDH has invested more than $1.2 billion in real estate projects. It has a background in raising funds from domestic sources, however, as PERE reported earlier, the firm is currently raising its first US dollar-denominated real estate fund, targeting $150 million.
Neither CDH nor Prax would comment.