China’s Sino-Ocean Capital plots $1.5bn office fund – Exclusive

The Chinese real estate developer is understood to be in talks with three potential institutional investors ahead of a final close.

Sino-Ocean Capital, a subsidiary of Chinese real estate developer Sino-Ocean Group, is expected to raise $1.5 billion for its latest real estate fund, PERE understands.

The fund will only invest in prime offices in Beijing and is on track to become the largest real estate fund raised by the firm to date. Sino-Ocean Capital had been expected to hold a final close on the fund at the end of 2019 but it is still in talks with Dutch pension fund manager APG Asset Management, Hong Kong’s central banking authority Hong Kong Monetary Authority and Singapore’s sovereign wealth fund GIC on potential commitments, according to five sources with knowledge of the matter. PERE understands that Sino-Ocean Capital looks to raise all of the $1.5 billion for the fund from the three potential investors.

The name of the fund has not been disclosed. Through the vehicle, Sino-Ocean Capital can invest in assets developed by its parent company, Sino-Ocean Group, two of the sources noted.

APG and HKMA declined to comment. Sino-Ocean Capital and GIC had not responded to requests for comment as of press time.

Besides the office fund, Sino-Ocean Capital also reportedly introduced a yuan-denominated fund to invest in logistics properties in China last year. The target size of the fund was understood to be at least 3 billion yuan ($436 million; €388 million). Backed by Chinese insurers Anbang Life Insurance Group and China Life Insurance Group, Sino-Ocean Group currently owns more than 180 development projects in Chinese cities and metropolitan regions.

Despite headwinds from the US-China trade war, the office sector remained the most popular property type in the Beijing market for investors, accounting for 52 percent of the total transaction volume in the Chinese capital in Q4 2019, according to a report by Cushman & Wakefield. For investors, the 5 percent average yield for Beijing office transactions continues to be attractive, the report said. Although the firm pointed out that Beijing office rents had been declining due to global economic pressures, its rental rates and occupancy levels remained moderately healthy compared to other cities.

Going forward, the supply of grade-A office stock in Beijing is expected to hit 3 million square meters in the next three years, according to the report. But with the growth of Beijing’s technology, media and telecom sector, along with its culture and tourism industry, Cushman & Wakefield expects the demand for office space in the city will continue to grow and drive rents and occupancy rates.