China's Star Capital plots double real estate fund launch

The Chinese private equity real estate firm, backed by some of the country’s most prominent businessmen, is hoping to haul RMB6 billion for a property fund investing in mainland China, and it is thinking of raising its first US dollar fund too.

Chinese private equity real estate firm Star Capital is set to hit the capital-raising trail for one of China’s largest Renminbi-denominated real estate funds.

Just one year after closing its second fund, Shanghai-based Star Capital is about to start fundraising for its successor vehicle with a potential target of up to RMB6 billion (€761 million; $979 million), a total that compares to the largest dollar-denominated vehicles to have targeted Chinese real estate. The firm has an official capital-raising target of RMB4.5 billion, but the hard cap is set at RMB6 billion. A first closing is anticipated in July, according to a spokeswoman.

Star Capital is a partial subsidiary of Chinese conglomerate Fosun International, which has an 80 percent stake in the firm. Its management own the remaining 20 percent. 

Fosun typically commits 25 percent to 30 percent of the capital in the firm’s funds with the majority coming from Star’s stable of high-net-worth individuals, which in the past have included high-profile Chinese businessmen such as Jack Ma, founder of online retailer Alibaba, and Guangchang Guo, chairman of Fosun International.

In a departure from Star Capital’s previous funds, Star Capital Investment Fund III will be focusing on a select number of China’s Tier I cities, including Beijing and Shenzhen, according to the spokeswoman. Its past two funds have focused on Tier II and Tier III cities, although the Yangtze River Delta remains a focal point for its investments.

The firm’s second fund, the RMB1.6 billion Star Capital Investment Fund II, has not yet been fully invested. Star Capital already has made three investments for it and expects to make one or two more before the end of the year to completely deploy its capital.

The firm is also widening its capital reach for the first time to include international investors, from which it hopes to hail about $200 million for a separate vehicle, also focused on real estate investments. That fund would be managed out of Hong Kong. This fund is in the early planning stages, however, and Star has not yet set a time for its official launch.