Chinese development firm, Canada Land, is raising a $1 billion opportunity fund to target distressed residential assets in Greater China.
The Hong Kong-based firm said the closed-ended CDL China Real Estate Opportunity Fund was expected to hold a first close around June, with a final close expected in August.
The fund will primarily focus on residential multifamily assets, with around 40 percent of the vehicle targeting commercial and mixed-use opportunities in cities such as Hong Kong, Shanghai, Macau and Guangzhou. It will also look to second tier cities across Greater China.
In an unusal move, the firm has told investors it will consider liquidating part of the fund in an IPO after the second or third years, provided the Chinese real estate market warranted such a move. “This would create liquidity for LPs as opposed to them being tied up for the full five or seven years. We think that’s a pretty interesting option for investors to consider,” Nobrega added.
William Nobrega, managing partner of the Conran Group, which is advising the CDL fund, told PERE the seven-year fund, which is targeting IRRs of around 22 percent, was also focused on the “long-term fundamentals” of the Chinese economy, particularly the expected growth in domestic consumption.
Dr. William Yip, chairman of Canada Land and author of books such as Riding South on a Crane and Doing Business in China, said in a statement the current economic downturn had “set the stage for one of the most lucrative investment opportunities in recent years and in the history of Chinese real estate”.
However, he added that demand for residential housing would rise in the future, not least given current China’s housing shortfall of almost seven million homes.
Canada Land is expecting to launch other property funds in the future.