ASIAVIEW: The Bai and Cai show


China Investment Corporation (CIC) is not known for courting the headlines, but headlines are precisely what it got as two global heads of real estate departed from the Beijing-based state investment fund in quick succession around the start of the year.

Last month, news emerged of a third incumbent. Xiao Qing Bai, CIC’s current head of private equity for North America, is now in charge of all things bricks and mortar. In an unprecedented move by CIC as far as that position is concerned, Bai has been charged with overseeing the $400 billion-plus sovereign wealth fund’s increasingly international real estate empire on top of her private equity duties.

CIC evidently has recognised that is a tall order and has appointed Zhi Wei Cai, previously a director in the real estate team, as deputy head. Cai will take day-to-day responsibility for the state fund’s efforts in the asset class, PERE was informed by a source familiar with the situation, who declined to be named.

Bai and Cai are understood to be part of a leaner team, following the departures of Collin Lau, its first and longest-serving real estate head, and Patrick Wu, a director who replaced him but quit the role just weeks later. In comparison to last year, when Lau was in charge and there were six to seven real estate investment professionals on the team, there are understood to be just three or four currently.

The senior changes are not expected to have any implications for the real estate investing strategy of CIC, although there’s evidence that suggests the reduced numbers within CIC’s real estate team did lead to certain decision-making delays. For instance, it is understood that CIC’s decision to approve the extension of the investment period of Morgan Stanley Real Estate Investing’s latest global opportunity fund, Morgan Stanley Real Estate Fund VII Global, was held up before ultimately being approved by Ludvig He, another CIC long-timer who is now global head of private equity and to whom Bai reports.

The senior changes are not expected to have any implications for the real estate investing strategy of CIC, although there’s evidence that suggests the reduced numbers within CIC’s real estate team did lead to certain decision-making delays

Despite the changes, few people doubt CIC’s continued clout in the global real estate investing universe. In December, as Lau was handing the baton to Wu, the investment house still managed to squeeze in a $1.6 billion deal targeting Japanese logistics. In a 50:50 joint venture with Singapore-listed logistics giant Global Logistics Properties, it put $272.9 million of equity to work, acquiring 15 warehouses in Tokyo from the first logistics fund of Chicago’s LaSalle Investment Management. That joint venture was the first between the two large entities – tie-ups like that take resources and, crucially, manpower as well.

Even with the musical chairs, the feeling within CIC’s Beijing headquarters at New Poly Plaza is that continuity is back on the cards. Both Bai and Cai have been with CIC for about five years, indicative in itself of their loyalty to the group. As one source familiar with the situation said: “People are reshuffled from time to time. At the moment, though, the clear message is Bai is the head and Cai is running the day-to-day [operations].”

The appointments of Bai and Cai came during a period of reshuffling for CIC’s private equity division as well. Olivia Ouyang, who previously was CIC’s emerging markets head, has the added responsibility of leading its private equity efforts in Europe following the resignation of Lau, who is expected to return to Hong Kong. Lau leaves this month once a handover transition period is completed.

While Lau’s decision not to renew his contract with CIC was made for family reasons, it is understood he will remain active in the alternative investment space. Well known for his loyalty to CIC, Lau also is expected to continue assisting the state fund in its future endeavours, albeit not as an employee.

Nonetheless, CIC was understandably loathe to lose Lau, so much so that PERE understands he was offered a contract that would see him remain in Beijing for another six years – an offer he declined. Recalling the impressions he made on certain contemporaries, whom PERE featured in a profile of CIC’s real estate division last year, Lau has built a solid legacy during his time as global real estate head, leading the state fund in such investments as the recapitalisations of General Growth Properties, Sydney-based Goodman Group and Canary Wharf landlord Songbird Estates.

Perhaps unkindly, those sorts of deals were described by one observer at the time as “low-hanging fruit” for capital-rich groups like CIC. That implies that, when Lau took charge in 2009, he had a ripe market in which to play, awash with distressed – yet quality – assets available for purchase at a time when few others could buy. Still, he got those deals done, providing the state fund with attractive returns in the process.

Whether Bai and Cai can take down similar investments for CIC will be seen over the months and years to come, so long as they stay put. Either way, it’s their show now.