RRJ Capital, the Asia-focused private equity firm founded by Goldman Sachs veteran Richard Ong, has agreed to buy $50 million of new shares in the Hong Kong-listed China developer CIFI Holdings in one of its first forays into the real estate sector.
The investment will give RRJ an approximately 4.3 percent equity stake in CIFI. RRJ will subscribe to about 257 million new shares issued by the Chinese developer at HK$1.52 (€0.14; $0.2) per share.
The investment comes in addition to a $100 million bond investment by RRJ in the company, RRJ’s co-chairman and co-chief executive Charles Ong said in the statement, bringing the total amount the private equity firm has invested in CIFI to $150 million.
Although it has been watching the sector for some time, the CIFI investment represents RRJ’s first foray into the real estate space, according to Vivian Lam, managing director of the firm.
Its primary business is expected to remain in private equity investments, but Lam told PERE that RRJ will continue to look for “winners” among Chinese real estate developers, and hopes to select another two or three in the next few years. At this point, there are no plans for the firm to invest in real estate directly yet.
“In Chinese real estate, we certainly see more opportunities coming up, as a lot of small- to mid-cap real estate companies prepare to IPO,” Lam said. The founders of RRJ invested in Chinese developers in their previous roles, she added, “which is why, after seeing the cycles [of such companies], we believe right now is the right moment to invest.”
CIFI will mostly use RRJ’s investment to acquire more projects and land for development, according to the statement.
The equity for this investment came from RRJ’s $3.5 billion second fund, which closed earlier this year, below its $5 billion target. The fund has made a number of other private equity investments recently, including a S$38 million (€22.4 million; $30.7 million) investment in SIIC Environment Holdings, a China-focused water treatment business listed in Singapore.
The Hong Kong-based group was formed in 2011 when co-founder and co-chairman, Richard Ong, formerly head of Asia investment banking at Goldman Sachs, spun out of his private equity firm Hopu Investment Management. His brother Charles Ong, who had previously spent 10 years at Singaporean sovereign wealth fund Temasek Holdings, holding positions including chief investment officer and chief strategy officer, joined him as the co-founder and co-chairman. With those credentials, RRJ was able to raise an aggregate of $5.9 billion across its two funds.