Hong Kong-based investment manager CITIC Capital has formed an asset management joint venture with international shopping center specialist Sonae Sierra, for which the fund manager will contribute some of its real estate team, according to a joint statement.
The joint venture, which is still in the process of forming a brand, has been formed to both help Sonae break into the China market and give CITIC greater resource for managing its shopping mall assets. It will function as a separate operating business to manage both CITIC-owned and third-party malls in China.
As the new business is setting up, however, CITIC is also expected to have its real estate team advise on and provide support for developing the business. The CITIC real estate team will remain intact, and eventually both firms will hire a separate team for the JV, which will be led by João Pessoa Jorge, the previous chief executive of Sonae Sierra Brazil. But some CITIC Capital real estate team members are expected to continue working with the new business on the side, particularly as it involves their own projects.
The services that CITIC's real estate team are expected to provide are more informal, such as communication about market trends and providing information and consultancy, according to a CITIC spokesman. According to the statement, the current team is already prepared to offer its services to CITIC’s shopping mall assets.
A CITIC spokeswoman added that both CITIC Capital Holdings and Sonae are also expecting to contribute financially to the JV, but the long-term goal and size is still being determined. “The immediate goal is to establish a brand and get a few assets under our management,” she said.
Sonae, which is 50 percent owned by London-based property firm Grosvenor Group, already manages 85 large shopping centers worldwide and specializes in managing themed shopping centers, but does not have much of a presence in China yet. The Maia, Portugal-based company is hoping to leverage CITIC’s connections in the Chinese market to build the “needed unique connections.”
“Retail growth in China has been unprecedented and rapid, driven by the country’s urbanization, strong economic growth and the rising need for unique shopping experiences and services,” CITIC Capital president Haitao Zhang said. “The strategic partnership with Sonae Sierra will further strengthen our retail asset management capability, supporting our growth strategy in the retail property space in China, and bringing long-term value to our investors.”
Last year, CITIC closed a $683 million retail property fund for the Chinese market. The firm is targeting an 18 percent IRR from the fund’s investments, and as of the fund’s final closing in June had already invested $250 million of equity in three projects.