COS Capital, the Beijing asset manager backed by China state-owned, financial institution China Orient Asset Management, has embarked on a real estate investment program in Europe with the intention of deploying as much as €1 billion in the region over the next three years.
The firm intends to replicate the model it adopted in the US approximately 18 months ago whereby it hired a regional head, opened an office and acquired assets on a deal-by-deal basis before launching funds for a predominantly Chinese investor base.
To that end, the firm has appointed Roberto Varandas as managing director of COS Capital Europe to launch its office in London’s Mayfair, start growing a team and to find prospective investment partners. Varandas was formerly global head of business development at London-based asset manager Aberdeen Asset Management.
COS Capital expects to deploy capital into primarily value-add assets in the first instance and is agnostic with regards to what property sector.
Lijan Chen, COS Capital’s chief executive officer, said in time the firm would seek to run core strategies too.
He said: “To further grow our worldwide business, we plan to build up the scope and scale of investments in Europe that match what we have already achieved in the US, by helping investors diversify their real estate exposure globally.”
Chen told PERE how Cos Capital’s cost of capital was, in this first instance, reflective of the return requirements of its sponsor, China Orient Asset Management, and its recent co-investor, the Chinese insurance firm, Sun Life Insurance. On a headline basis, the two organizations are seeking approximately 6 percent from their real estate exposure, generated via their sponsorship of COS Capital.
Chen said: “If [the sponsors] want core markets and prime locations then it is hard to get a 6 [percent]. But if we go to value-add opportunities, in time they will enjoy that income coming in.”
Accordingly, the two investors are expected to be meaningful seed investors in any funds the firm raises. For instance, in Cos Capital’s opening US opportunity fund, which was launched earlier this year, and is expected to have a first closing before 2017, they will account for at least 20 percent of the equity.
That fund is ultimately expected to attract $200 million from Chinese investors, including insurance companies, and will be seeded with assets already acquired by the firm. A second, value-add fund for US investments is also in the offing, this time with an equity target of about $300 million. To date, Cos Capital has acquired five assets stateside with a value of approximately $1.5 billion. The firm’s US business is led by former MGPA Japan chief executive officer Tom Mills.
Varandas told PERE: “There are three things that are important to Chinese investors: co-investment from the sponsor, a seeded portfolio and the ability to invest alongside other Chinese partners.”
The firm’s US exploits and the subsequent opening of a European office marks the rapid expansion of a firm that only formed three years ago. Today, Cos Capital has 100 staff working from offices in Beijing, Shanghai, Shenzhen, Hong Kong, San Francisco and after this latest launch, London. They are responsible for the management of more than $3 billion of assets under management.