CITIC sets sights on $600m for fourth China fund

Hong Kong-based private equity and real estate firm CITIC Capital will begin fundraising this year for its fourth opportunity fund.

The firm is aiming to raise up to $600 million for a fund with the working title of CITIC Capital China Retail Investment Fund, the capital of which is expected to be used for retail investments in across China.

Stanley Ching, senior managing director at CITIC Capital, who leads a team of 26 in CITIC’s real estate division, said the fund would seek to take full-ownership positions with the capital, although shared ownership with long-term development partner China Vanke was a possibility at this stage. In total, he expected the fund to be able to manage between six and seven acquisitions.

Ching described CITIC’s real estate strategy in a recent interview with PERE, published in this month’s magazine. In the interview, he said China’s demographic shift towards increased consumer spending, coupled with more stringent residential investing policy measures adopted by the government in light of recent market bubble fears, had prompted the firm’s switch from residential to retail investments.

He said: “We’re still hearing people talk about second tier city residential, but we’re out of there already. Now that the government is shifting from export-orientated growth to domestic consumption, we’ll be in the right sector. These demographic changes will help retail.”

The fund is expected to attract commitments from a range of institutional investors from the US, Europe, the Middle East and Japan. It will be a closed-ended, seven-year vehicle that will be used to target returns of approximately 18 percent IRR and an equity multiple of 2x.

Hong Kong-headquartered-CITIC, which was established in 2002 and has grown to include offices in Shanghai, Beijing, Tokyo and New York, launched its first real estate fund in 2005, the CITIC Capital China Property Fund. The vehicle, effectively a one-asset club deal, closed on $86 million before exiting in less than two years generating a 30 percent IRR and 1.48x equity return. Since then, the firm has been able to raise an increasingly bigger series of funds, bringing it to this year’s fourth effort.

To read PERE’s interview with CITIC Capital’s Stanley Ching, click here.