The spotlight has been thrust onto alternative real estate in Asia after two of the region’s biggest investors backed a vehicle focused solely on car parks in China.
China Resources Capital, the financial services arm of Chinese state-owned conglomerate China Resources, and Dutch pension fund manager Algemene Pensioen Groep (APG), have each committed $120 million to the China Resources Car Park Investment Partnership, a club fund intended to build “a scaled and diversified portfolio of car park assets in city centre locations in China”.
A further $25 million has been committed between Macquarie Capital, the investment advisory arm of Australian investment bank Macquarie, and Wilson Parking Hong Kong, a car parking manager and operator wholly owned by Sun Hung Kai Properties, a Hong Kong-listed property company. Macquarie Capital is acting as the sole financial advisor for the transaction.
It is understood the vehicle could see further equity commitments from between one and two further investors.
In an announcement, China Resources and APG said the vehicle’s focus would be on sites in tier one and tier two cities where the current and projected car park demand and supply imbalances are most evident. They said the aim was to become the largest car park focused investment vehicle in China by acquiring both developments and already operating properties. The vehicle will be seeded with existing investments from China Resources Group but is expected to grow as further capital is committed by other parties.
Jiang Wei, Chairman of China Resources Capital, said: “CR Capital will leverage various business units within China Resources Group to provide specialist development, asset and investment management services in order to create a valuable portfolio for the Partnership.”
Daan van Aert, head of non-listed real estate Asia at APG in Hong Kong, said: “We look forward to working closely with China Resources to invest in car park assets in China’s fast growing cities. In our view, well-established tier one and tier two cities will continue to benefit long-term from China’s continued urbanization. We respect the strong brand affinity China Resources has established with its partners which will enable us to achieve true long term success in our cooperation.”
The move into car parks investing by China Resources and APG is something of a rare foray into alternative real estate investing in Asia. Typically, international institutional investors have concentrated their focus on mainstream sectors such as offices and retail properties in the belief that investing in the region carries sufficient risk.
However, hotels and logistics investing has become more prominent of late as they have demonstrated they are capable of generating attractive cash-flows, yields and significant capital appreciation. This has led to certain investors considering outlays in more alternative asset classes like care homes, student accommodation and data centres. Nonetheless, little equity had been raised for such assets before today’s announcement by China Resources and APG of their vehicle for car parks.
They are not alone. LimeTree Capital, a Hong Kong-based private equity real estate firm formed in 2006, has appointed Mercury Capital Advisors late last year to raise $325 million for a commingled fund also focused on car parks in China. No equity closing for that vehicle has been announced yet.
It has been busy month for China Resources Capital after it announced its private equity platform Harvest Capital Partners had raised RMB956 million (€112.54 million; $153.36 million) for a joint venture fund with another China Resources company, the residential developer China Vanke, to back a prime development in Hongqiao, Shanghai. That single asset vehicle was the first to be launched through Harvest Capital since it expanded its investment strategy from real estate to other private equity sectors as well last year.