CITIC secures Townsend investment for fourth fund

The Hong Kong-based private equity real estate platform has attracted $225m in equity commitments from institutional investors from the US, Europe and Asia including a cornerstone investment from Cleveland-based investment and advisory firm, The Townsend Group.

CITIC Capital has raised $225 million in a first closing for its fourth China real estate opportunity fund, including a cornerstone commitment from Cleveland-based investment and advisory firm, The Townsend Group.

The Hong Kong-based private equity real estate platform announced today it had raised the capital from clients of Townsend and institutional investors in the US, Europe and Asia for the CITIC Capital China Retail Properties Investment Fund, which has an ultimate capital target of $600 million.

PERE revealed the news of CITIC’s plans for the forth fund back in April, as the firm had reached the 70 percent invested mark for its previous fund effort, China Real Estate Investment Fund III, which attracted $400 million in January 2009. The fourth fund is structured as a closed-ended vehicle with a life of seven years and is expected to generate an IRR of approximately 18 percent and an equity multiple of 2x.

The fund’s primary focus is on Chinese retail property and mixed use developments in second and third tier cities which the firm said “offer high potential of economic growth that is driven by strong urbanisation”. CITIC said it would seek to make investments via partnerships with “reputable” local partners.

The firm also said the fund had been seeded with the ID Mall, a shopping mall in Changsha in the Hunan province which it described as “one of the most vibrant cities in central China with strong economic growth as well as high consumer spending potential”.  Stanley Ching, senior managing director and head of CITIC Capital’s Real Estate Group, said the firm was especially interested in investing in projects that benefited from incoming infrastructure and transport connections. Ching explored CITIC’s current investing strategy in a PERE Blueprint interview published in April.

Joseph Tang, director at Townsend said of its commitment: “The China market is definitely what we have eyes for, especially when our clients are getting more sophisticated with their investment in emerging markets. Investors nowadays are looking for local managers with proven track records, an established platform and a high standard of governance. We are delighted that CITIC Capital has all these qualities.”

Indeed, the firm has performed well in the real estate space since launching its first dedicated vehicle, the CITIC Capital China Property Fund. Effectively a one-asset club deal, the vehicle attracted $86 million before exiting less than two years later after producing a 30 percent IRR and 1.48x equity multiple. Its subsequent funds have grown exponentially, ultimately enabling firm to being to market its fourth fund.

The CITIC Capital Real Estate Group, which is part of CITIC Capital, the alternative investment management and advisory company, has invested in 18 projects valued at more than $3 billion since inception and through this fund that number is expected to increase.