Harvest eyes 2012 funds after approving retail deals

Hong Kong-based Harvest Capital Partners is planning to launch new funds in 2012 as it reaches the final stages of its earliest funds and approves the final acquisitions for its current retail development vehicle.

Hong Kong-based private equity real estate firm Harvest Capital Partners is preparing for new fund launches next year after approving the final investments for its CR China Retail Real Estate Development Fund I.

The fund closed on $466 million in May this year, 12 months after its first closing, and has already acquired four retail developments. Harvest said it has now approved three further investments which would bring the vehicle to past the required 85 percent committed mark needed before launching any successor vehicles.

The fund has been invested in the Tier II and III cities of Ningbo, Hangzhou, Jiangyin and Maanshan already. The new investments would be in the Tier II cities of Wuhan, Chengdu and Qingdao. Typical investments require approximately $70 million per deal.

Once these deals complete, Harvest is expected to determine which new investment vehicles to bring to market in 2012. George Agethen, head of capital raising and business development at the firm told PERE that both a second retail development fund and another opportunity fund were among the vehicles currently considered for launch.

He said: “We’ll certainly be out with new strategies in the new year. It just depends on which ones. I think there’s room for both but it really depends on how immediate the opportunities are and how we set up our distribution strategy in terms of the types of LPs we would approach.”

“The market conditions are such that there is an excellent window for investing in China right now and an opportunity fund best takes advantage of that. At the same time, we are doing extremely well with our retail development programme and we don’t want to allow that to go cold,” he added.

Harvest’s retail development fund was launched at the turn of 2010 alongside a smaller income-generating fund called CR China Retail Real Estate Income Fund I, for which $300 million of commitments was soft-circled. That fund is expected to be deployed next year, Agethen said.

Plans for new vehicles come as Harvest Capital nears winding up its 2007 and 2008 closed-ended opportunity funds – the $500 million, Shariah-compliant CR AL-Rajhi China Real Estate Growth Fund and the $200 million Harvest China Real Estate Fund II.  Harvest is also in the process of selling the final asset of its 2006 closed-ended $345 million CR China Real Estate Growth Fund I.

It is understood the approximate 20 percent IRR and 2x equity multiple targets for these funds have been either met or exceeded.

Rong Ren, chief executive officer at Harvest, said: “Our fundamental approach hasn’t changed much over the years: buy cheap in prime locations, manage the assets well via our in-house team and the exits will take care of themselves.”

For its retail investments, Harvest Capital has partnered with Shenzhen-based SZITIC Commercial Property (SCP), a retail developer focused on China.

Leo Ding, chief executive officer at SCP said of the retail development fund’s final three slated investments: “I am hopeful that SCP, together with our partner, Harvest Capital, are able to secure these projects for the retail fund as they are great projects that the teams have worked extremely hard on over the past two years.”