Harvest starts 2010 with $800m double fund launch

Hong Kong-based Harvest Capital Partners relayed its plans for two retail funds to PERE this morning. The vehicles, one targeting income-producing assets, the other development, are expected to close by June.

Harvest Capital Partners, the Hong Kong-based real estate investment management firm, is to increase its exposure to retail across mainland China with the launch of two funds.

PERE can reveal that the firm, majority owned by state-owned China Resources Group, hit the fundraising trail this week and is planning to raise $300 million for a vehicle targeting assets with stable income streams, and $500 million for a vehicle targeting development. Both will seek to buy in tier II and tier III cities across China.

Harvest plans to hold final closes on the funds by June. The fund targeting income-producing assets will run for five years and the fund targeting development assets will run for six years. Both have potential for extensions.

Rong Ren, chief executive officer of Harvest Capital, admitted the fundraising market remained challenging but said he expected the vehicles to attract investment on the back of factors including “a strong local sponsor” and “an identified pipeline of investments”.

“I am optimistic the potential investors will find the offer unique,” he said. Harvest, which currently manages more than $1 billion in capital over three funds, has previously operated a wider investment remit, buying residential assets and other commercial assets as well as retail. The firm’s decision to become more polarised in its strategy coincides with a wider preference for sector and geography specific funds from many investors.

Jiang Wei, chief financial officer of China Resources, said the funds should provide investors with access to China’s “resilient” economy and “strong retail sector fundamentals”.

The CR China Retail Real Estate Income Fund I will seek to acquire assets previously controlled by SZITIC Commercial Property, a Shenzhen-based development firm in which China Resources is a shareholder. Eight assets have been identified for the fund from which the firm plans to provide investors with a return of 12 percent to 15 percent.

The other vehicle, the CR China Retail Real Estate Development Fund I, will target development assets from which Harvest expects to provide a return of 20 percent. The vehicle is expected to hold a maximum of 15 assets although seven have been identified at this stage.

Both vehicles will deploy leverage of up to 50 percent loan to value. Target investors in the vehicles include institutions from Europe, Hong Kong, Singapore, Japan and the Middle East with capital also being contributed by the fund sponsors.