Harvest, Grosvenor venture kicks off with $277m Shanghai deal

Harvest Real Estate Investments, the collaboration between Harvest Fund Management and Grosvenor Fund Management, has taken down its first investment in China, acquiring a shopping centre in Shanghai in a separate account for two Chinese institutional investors.

The China-focused joint venture company of Harvest Fund Management and Grosvenor Fund Management has completed the purchase of a 450,000 square feet shopping centre in Shanghai in its first deal since forming last year.

Harvest Real Estate Investments (HREI) has invested RMB1.7 billion ($277 million; €212 million) to acquire the shopping centre on behalf of two Chinese institutional investors, one unnamed corporate investor and an unnamed Chinese insurer. Chinese insurance companies in 2010 were cleared by the China Insurance Regulatory Commission to invest in real estate although instances of them doing so have, so far, been rare.

The firm told PERE: “This is a groundbreaking transaction in China, as it marks one of the first instances that a domestic insurance company has appointed an independent investment manager for a real estate program.” HREI said the investment could lead to more on behalf of these investors and potentially other Chinese institutions.

HREI described the deal as a separate account mandate devised to run for five years with a view to providing its investors a stable rental income to match their “fundamental return requirements”. The firm said: “The program has been specifically tailored to meet the investment objectives of the institutional investors to deliver a core commercial exposure to Tier I cities in China.”

HREI declined to identify the mall acquired but said it houses retailers including Starbucks, UNIQLO, Sephora, Westa Cinemas as well as various food and beverage outlets.

The transaction marks the first significant business done by HREI, which was formed last year by China’s second largest asset manager and the London-based property company. The company employs a team spun out from private equity real estate firm Harvest Capital Partners, led by chief executive officer Rong Ren.

Separately, HREI is also out capital raising for its first China-focused, private equity real estate fund called the HREI China Total Return Fund. The firm is targeting a fundraising of $500 million for a vehicle through which it plans to make investments in challenged situations within the retail, office and residential sectors of China’s more established property markets. The firm is understood to be targeting a first closing in the autumn.