Pacific Alliance Group, best known for completing mainland China’s first ‘classic’ LBO deal last year, is launching a real estate fund dedicated to greater China. According to a report from the website FINAlternatives, the $3.5 billion Hong Kong-based hedge fund and private equity manager is launching the Pacific Alliance China Land fund in November with a target of $350 million.
The fund, focused on the residential, commercial and industrial sectors, will reportedly target completed and semi-completed projects through forced sale and distressed situations. It will also take pre-IPO equity stakes in leading regional developers, followed by direct co-investment in selected real estate projects. Sixty percent of the fund's portfolio will reportedly be invested in second and third-tier cities and the rest in first-tier cities like Hong Kong and Macau.
Pacific Alliance was founded in 2002 by Horst Geicke and Chris Gradel to focus on buying assets at a discount in North and Southeast Asia. Geicke is the former president of the European Chamber of Commerce in Hong Kong and is also a former adviser to the Hong Kong Government. Gradel formerly worked with the Pritzker family, the owners of the Hyatt hotel chain, managing their investments in China through their Marmon Group holding company.
Pacific Alliance manages $1.2 billion, primarily in private acquisitions in China and Vietnam. The firm currently has two other funds, the $1 billion Asia Opportunity Fund, listed on the London’s AIM, and the $570 million ARC Capital Holdings, a buyout fund focused on Greater China. Asia Opportunity Fund was launched on the back of two previous private vehicles. Pacific Alliance I was invested between August 2002 and September 2004 and reportedly generated a net IRR after all fees of more than 60 percent. Pacific Alliance II was launched in August 2005.
The real estate fund will not be the group’s first foray into the sector. In March 2006 the firm launched an AIM-listed dedicated real estate fund called VinaLand, which invests exclusively in properties in Vietnam. That fund was launched after the firm’s first AIM-listed fund, Vietnam Opportunity Fund, saw an increasing amount of its portfolio going to real estate. VinaLand now has $217 million in assets.