China startup plots $300m fund debut

Starcrest Capital Partners, a newly-founded Hong Kong-based private equity real estate firm, is plotting to launch its maiden blind-pool fund for mainland China by early next year, targeting between $200 million and $300 million of equity from overseas investors, PERE can reveal.

The fund would be US dollar denominated, and Starcrest would target commitments from high net-worth individuals, family offices and institutions, firm managing director Jeff Liu said. It is expected to target opportunistic returns with an emphasis on investments in first-tier cities, but is not expected to have any particular sector focus. In terms of strategy, however, Liu added that Starcrest focuses especially on refurbishment and adding value to the assets it acquires, or a “buy-fix-sell” model, in preparation for a yield-seeking investor.

The firm has already invested approximately $200 million of equity since its 2010 founding, most of which was raised on a deal-by-deal basis from high net-worth individuals and family offices it already has connections with. Starcrest has drawn both Renminbi and US dollar investors for its deals.

“So far, raising capital has not been much of a problem for us because of our track record of exits,” Liu said. One land deal that Starcrest exited about a year ago, for example, yielded an approximately 3x equity multiple and 122 percent IRR. Other exits have ranged from 20 percent to 50 percent IRRs, he said.

In preparation for the new fund, Starcrest just closed its first offshore deal with a $90 million acquisition in Zhangjiang High-Tech Park in Shanghai. The firm bought three office buildings from a domestic information technology company, and is planning on extensive refurbishment in order to attract high-quality tenants later on.

Although Starcrest has already raised the capital it needs to complete the Shanghai deal, Liu said the firm is also looking for potential institutional co-investors in the deal, also in preparation for the fund.