Red Wall Real Estate Investment has become the latest firm to launch a fund focussed on Chinese real estate.
Red Wall, which has offices in Shanghai and Switzerland and is registered as a Luxembourg company, is seeking $100 – $150 million from investors for a Grade A Shanghai office fund, which it said was the most attractive way to participate in the “China success story”. It said investments in the asset class could generate an internal rate of return of 12-15 percent for potential investors.
The launch comes as China’s breakneck economic growth continues. It has increased GPD more than tenfold since 1990 and is currently ranked the second largest economy in the world behind the US. Just last month, the International Monetary Fund (IMF) forecast China would become the biggest economy in the world by 2016, with GDP expected to grow from $11.2 trillion this year to $19 trillion.
Also, a report by The Economist Intelligence Unit earlier this year said real estate assets in the RNB currency were likely to be one of the best-performing global asset classes over the next decade given the combination of urban population growth and exchange-rate appreciation. Shanghai’s population alone has nearly doubled to reach 20 million people, and it harbours ambitions to become Asia’s main financial hub by the year 2020.
Red Wall said its previous fund, Jilin Sicar Investment Partners, showed a value increase of 70 percent in the first 46 months following inception in 2007. It said despite global financial turmoil, the fund had made an average return of 14.5 percent. Among its investment are the Shanghai Stock Exchange building and the World Trade Tower.
PERE’s proprietary Capital Watch data charts no less than eight opportunistic funds in the market. The ING Real Estate China Opportunity Fund II is the largest of them, seeking $750 million in capital commitments. Others raising China-specific funds include AXA Real Estate Investment Managers, Century Bridge Capital, CITIC Capital, Harvest Capital, and Pacific Alliance Group.