Chelsfield Asia, a subsidiary of the London-headquartered real estate investment manager Chelsfield, has struck its first deal from its debut Asia fund in Hong Kong.
The firm has completed the acquisition of Provident Square, a neighborhood shopping center located in the North Point district in Hong Kong, through a 50:50 joint venture partnership with the Pamfleet Group, a Hong Kong-based investment manager. The total purchase price for the three-storied retail asset is $257 million.
The acquisition, made in December, comes a few months after Chelsfield Asia’s debut Asia value-add fund was brought to market, following Chelsfield’s purchase of Dymon Asia’s real estate investment management business in November 2016.
The fund has a $450 million capital raising target, and has so far raised around $228 million in equity, including the first close amount and co-investment capital. A second close is expected to be held in the middle of 2018, with a final close targeted for the end of the year. Chelsfield Asia is targeting investments in Hong Kong, Singapore, Shanghai and Tokyo from this fund, with targeted returns in the mid-teens range.
With its maiden deal, Chelsfield Asia is banking on the turnaround in sentiment in Hong Kong’s retail sector, buoyed by improving consumer confidence and relatively stable political stability following the election of Carrie Lam as the island-city’s chief executive last year.
“We are positive about Hong Kong’s economic outlook based on the improvement in inbound tourism, local consumption and business confidence,” said Nick Loup, chief executive officer of Chelsfield Asia.
Part of the recovery in the retail sector is also being fuelled by a revival in the mainland Chinese tourist arrivals, which had dropped in the past few years due to several reasons, including an anti-corruption crackdown within China and a slowing economy.
One of the largest real estate deals in Hong Kong in recent years was in the retail sector last year when Link REIT sold 17 retail centers, totalling around 1.2 million square feet, alongside over 8,000 car-parking spaces to a consortium led by Gaw Capital Partners for HK$23 billion ($2.94 billion; €2.3 billion). The estimated initial yield was understood to be 2.3-3.2 percent.
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