Grosvenor, the London-based real estate investment and fund management business, and Harvest Fund Management (HFM), China’s second largest asset manager, have combined to create a real estate investment management firm focused on investments across Greater China.
Tipped by PERE in July, the launch of Harvest Real Estate Investments (HREI) marks the 300 year-old firm’s first investment management joint venture. Simultaneously, it marks HFM’s first foray into direct real estate investing. The Beijing-based firm was launched in 1999 and has since built up approximately $37 billion of assets predominantly via its mutual fund and fixed income investing vehicles.
Initially, HREI is expected to raise and deploy capital across Greater China, both international, institutional dollars from GFM’s investors and institutional and retail RMB from HFM’s investors. However, it is expected that HREI could also provide HFM’s investors a conduit to investing Chinese capital offshore through GFM’s global funds.
The coming together of Grosvenor and Harvest follows almost a year of discussions between the two parties.
The ownership of their platform is split 50 percent HFM and the other 50 percent is majority owned by Grosvenor and minority owned by the management, led by former Harvest Capital Partners (no relation to HFM) chief executive officer Rong Ren. Ren resigned from Harvest Capital in May following its majority owner China Resources’ decision to grow from a real estate firm to a multi-asset class private equity firm.
At HREI, Ren leads a team of 20 staff, 10 of which came from Harvest Capital. Another four come from Grosvenor Fund Management’s (GFM) Chinese division, although they will also continue to manage GFM’s Vega China Retail Fund, a retail-focused vehicle which attracted $600 million of equity in 2008, $127 million of which was invested in a shopping centre in Shanghai called The North in 2010.
Ren is part of a five-strong board of directors at the new platform. The other directors are: Jeffrey Weingarten, CEO of GFM, Morgan Laughlin, GFM’s managing director for Asia Pacific, Henry Zhao, chief executive officer of HFM, and Lindsay Wright, the CEO of HFM subsidiary Harvest Alternative Investment, which is responsible for its stake in the venture.
Weingarten told PERE the creation of HREI was “ideal” as it combined Grosvenor’s global footprint with one of China’s “preeminent fund management business which, most importantly, has the same values and approach towards investing for clients as we do”. He also highlighted the importance of installing a local team to run the business. “Rong Ren’s team has been investing in China successfully for a long time,” he said.
Zhao said HFM has long evaluated an expansion into private equity real estate investing and was particularly mindful of how to further accommodate the increasingly more sophisticated investment requirements of the country’s institutions.
Commenting on Chinese real estate in general he said: “In the past success came through accumulating land banks and through financing. But today the model needs to be better. Institutional investors will have special requirements and so we need a special team and global experience.”
HREI has not yet disclosed the exact structure or strategy of its first investment fund but Ren said it would likely be different to the models he resided over when at Harvest Capital Partners. He said: “The business model for Chinese real estate is changing and that goes for developers, investors, trust companies, banks and the government. We’ll announce our fund strategies soon but, looking today, it will need to be different to products or strategies launched in the past.”