InfraRed charts second $700m China fund

InfraRed Capital Partners, the real estate and infrastructure investment management business spun out from HSBC last year, is back on the fundraising trail with its second Chinese real estate fund, InfraRed NF China Real Estate Fund II, PERE has learned.

The firm is understood to be targeting approximately $700 million of equity commitments for the vehicle with a view to investing the capital in between eight and 15 assets. It is thought that early commitments from investors in InfraRed’s first China fund, InfraRed NF China Real Estate Fund I, are already at the negotiation stage.

InfraRed is expected to put the money to work predominantly in the retail sector – as it did with its previous China fund – but also in the office and residential sectors. Mezzanine financing investments could also figure.

The closed-ended fund is to run for eight years, have an investment period of three years and its target IRR is 20 percent – in line with other private equity real estate funds targeting China.

InfraRed has again teamed up 50:50 for the fund with Hong Kong-based textiles to property conglomerate Nan Fung Group. As with the first fund, the joint venture partners have signed an agreement ensuring co-investment rights to Nan Fung’s deal pipeline until the investment period of the vehicle has expired. Nan Fung, established in 1954, has developed more than 130 projects comprising more than 50 million square feet.

InfraRed NF China Real Estate Fund I has now been fully deployed into 16 projects, four of which have already been exited including One Financial Street and Metropolis Tower, office investments in Beijing which were sold in the second and fourth quarters of last year respectively. The fund was closed ion $707.7 million in 2007.

At that time, the fund’s manager was InfraRed’s previous incarnation HSBC Specialist Investments, part of HSBC bank. The senior managers rebranded the fund and the platform after spinning out the business in April last year. Following the spinout, the managers retained a majority 80.1 percent stake in the platform while HSBC retained the remaining 19.9 percent.

To read more about InfraRed’s second China fund, see this month’s PERE magazine.