Shanghai's Noah plots $2.8bn real estate fund

The NYSE-listed wealth management firm based in Shanghai plans to reach out to China’s high-net-worth families for a fund aimed at providing an alternative financing source for the country’s real estate developer.

Shanghai-based wealth management firm Noah Holdings is plotting to raise a real estate fund with a view to propping up the flagging balance sheets of Chinese developers, according to a report by the Financial Times.
The firm, which services high-net-worth families in China with “over the counter” investment vehicles through which to invest their money, is understood to believe it can plug a financing gap left by China’s central government, which has been stemming lending by the country’s banks of late.

According to the FT, NYSE-listed Noah, which manages the capital of more than 27,000 clients, expects the capital raised for the fund to offer developers an alternative to now-pricy bank finance. Its fund, seeded with capital from venture capital firm Sequoia Capital – known for backing enterprises in a wide range of sectors including energy, healthcare and technology – is tipped to want to attract as much as $2.8 billion for the vehicle.

Part of the plan to do so, the FT said, would include the setting up of branches and seminars targeting the top 50 to 100 entrepreneurs in each Chinese city to commit capital to the vehicle.

The thesis of capitalising on scarce and expensive credit in China is currently one factor underpinning a number of private equity real estate strategies currently active in China. As such, a successful capital raising from high-net-worth individuals for the same cause could be regarded as a threat to private equity real estate firms, which typically raise capital for institutional investors.

Private equity real estate firms currently raising capital for China include CBRE Global Investors, CITIC Capital, Harvest Capital Partners, Gaw Capital Partners and Long Hills Capital.