EXCLUSIVE: Starcrest launches $300m debut China fund

The Hong Kong-headquartered private equity real estate firm will be investing in special situation opportunities via its maiden private equity real estate fund.  

Hong Kong-headquartered private equity real estate firm Starcrest Capital Partners has launched its debut fund for China.

PERE understands the firm has set a fundraising target of $300 million and a hard cap of $400 million for Starcrest China Real Estate Fund II. The blind-pool closed-ended fund, with term of 8 years, will be US dollar-denominated and the capital raised is expected to be invested in special situation deals across China.

An executive at Atlantic-Pacific Capital, the placement agent for the fund, told PERE the fund was officially launched in the beginning of October. A first close of around $100 million is expected to be held before the end of the year.

For the first close, the capital is due to be raised from the firm’s existing investors in other real estate projects; mostly family offices, high-net-worth individuals and corporates. Starcrest will coinvest “a substantial amount” as well. Following the first close, the firm plans to target investments from global and Asia-based institutional investors.

The capital is due to be invested in equity investments in the first-tier cities of China, with a special focus on Shanghai. Starcrest typically invests in special situation deals, which could involve distressed asset buys, or repositioning and refurbishing an asset.

According to the firm’s managing director Jeff Liu, the current softening in China’s real estate market has created opportunities for distressed buys. He further added that opportunities are also to be found in the asset dispositions coming out of a number of private equity real estate funds in the region that are in their exit phase.

Indeed, a paper published by CBRE last year, had estimated that around 50 private equity real estate funds raised between 2005 and 2008 are slated for termination by the end of 2015, unlocking approximately $40 billion of real estate in Asia.

Starcrest was founded in 2010 by Elvin Lim, previously head of corporate finance for Asia at MGPA; David Yeung, who spearheaded real estate investments at Goldman Sachs’ special situations group; Leo Jia, former deputy chief executive officer of the Shanghai-headquartered property developer Super Ocean Group; and Liu who earlier served as a managing director for China for Angelo Gordon.

Since its inception the firm has made investments in a total of nine properties across China, putting to work more than $300 million in equity. These include direct investments in office redevelopment projects, retail assets and joint venture residential projects funded on a deal-by-deal basis from high-net-worth individuals and family offices.