Everbright Ashmore, the Beijing-based real estate investment platform of Chinese state-owned enterprise China Everbright Group, is planning to hold a first close for its second private equity real estate fund in the next few weeks, on more than $100 million.
James Pan, chief executive of the firm, told PERE that most of the first close capital is expected to come from Everbright Ashmore’s sponsor, China Everbright. The remainder should come from two of Everbright’s anchor investors in its $153 million first fund, one based in Europe and the other based in Hong Kong. At this point, Everbright is only waiting on paperwork from the investors, Pan said.
Everbright Ashmore China Real Estate Fund II is expected to be invested via a similar strategy to that of its predecessor, targeting retail and residential investments across mainland China. Fund II’s residential developments are expected to happen in tier II and III cities, in partnership with local developers. Its retail investments are expected to involve less development and more refurbishment, but mostly be located in the suburbs of tier I and II cities.
“We are choosing to focus on lower-tier locations because we are facing the same situation we had in 2009: the land prices continue to rise in tier 1 cities,” Pan said. “So there we would have some concerns on our profit margin.” He said there are some areas where the land price alone is higher than the asset’s selling price.
Everbright already has two investments lined up for Fund II – one retail, one residential – but will wait until after the first close to deploy the capital. The firm’s 2010 vintage Fund I has exited two of its six projects, already returning 53 percent of the fund’s capital and posting returns of a 23 percent IRR and a 1.8x equity multiple, Pan said. The firm is hoping to return 100 percent of the fund’s capital to investors by the beginning of next year.
With approximately $1 billion funds under management across US dollars and RMB, Everbright Ashmore’s 25-strong team invests across opportunistic, value-added and debt platforms in China. Formerly known as Everbright ALAM, the firm was acquired by China Everbright and RQSI, a US management business, from failed Wall Street bank Lehman Brothers in October 2008.