CITIC closes $683m China retail fund

The China-focused fund manager exceeded its capital raising target at the final close of its first retail property focused fund.

CITIC Capital, the Hong Kong-based private equity and real estate firm, has held a final close on $683 million for its first retail-focused China fund, exceeding its $600 million target, according to a firm statement.

Launched in April 2011, the CITIC Capital China Retail Properties Investment Fund hit the market in a “tough fundraising environment,” but overall the firm was “pleased that the fund [was] warmly received,” said CITIC Capital senior managing director and real estate group head Stanley Ching in the statement.

The fund’s investor pool comprised of institutional investors from the US, Europe, the Middle East and Asia, according to Robert Lie, CITIC real estate group’s managing director. Most of the 18 investors who committed capital were new investors, he added, including some large pension funds and sovereign wealth funds.

PERE previously reported that the Cleveland-based investment and advisory firm the Townsend Group acted as the fund’s cornerstone investor. The fund had an $800 million hard cap.

The firm is targeting an 18 percent IRR from the fund’s investments, and has a maximum leverage capacity of 50 percent, Lie told PERE. As of its final closing, the retail fund had already invested $250 million of equity in three projects: one was a mall in the Hunan province capital Changsha, one in Anhui province capital Hefei, and the third in Shanghai, according to the statement. The Changsha mall was a co-investment with CITIC’s earlier fund, CITIC Capital China Real Estate Investment Fund III, as its final investment and the retail fund’s first investment, Lie added.

The Changsha mall was an existing property, while the Hefei and Shanghai investments are development projects that are expected to commence construction in 3Q 2013, according to the statement. The development projects are fully owned by the fund with no co-investment money.

Although several of the firm’s investors are interested in doing co-investments with the fund, Lie said that CITIC currently has no concrete targets for the amount of co-investment money it will use.

In a previous interview with PERE CITIC’s Ching credited China’s demographic shift towards increased consumer spending and the government’s more stringent residential investing policies for the firm’s switch from residential to retail investments.

As part of the alternative investment management and advisory company CITIC Capital, CITIC Capital Real Estate Group raised its first real estate fund in 2005, and now has $4 billion assets under management. It is jointly owned by the China Investment Corporation, Chinese conglomerate CITIC Group and Qatar Holding.

Cushman & Wakefield Corporate Finance served as CITIC’s placement agent for European investors.