Taming the dragon

New York-based alternative assets firm GSC Partners and property group Tishman Speyer are teaming up to invest in Shanghai and Beijing.

New York-based investment group GSC Partners is teaming up with property investor Tishman Speyer for a joint venture that will invest in property in major Chinese cities. The venture, which will be the exclusive vehicle for both firms' Chinese real estate investments, plans to develop upper-end commercial, residential and mixed-use projects.

“[Tishman Speyer] are an ideal partner from our perspective because the sort of developments Tishman have built around the world are precisely the sort of buildings multi-nationals need in China,” notes Keith Abell, co-founder of GSC Partners and a co-chairman of the JV, called Tishman Speyer GSC.

The JV plans to focus on Shanghai and Beijing with commercial projects marketed towards multinational companies and successful domestic firms, as well as residential developments for wealthy city dwellers. The firms are also considering possible investment in a host of secondary cities.

“Although there has been a lot of development over the past few years, little of it has been international-quality,” Abell says. “The market appreciates international-quality real estate.”

The firms see two factors driving the Chinese real estate market: urbanization and wealth creation. “China is urbanizing on an unprecedented scale in human history,” Abell says, adding that an estimated 400 million people could move from the countryside to the city in the next 15 years. “The other side is people in China's cities are getting wealthier.”

Abell says that, while China continues to develop its legal framework and mature as an economy, it has already become an attractive climate in which to operate. He has been doing business in the country since 1984, with stints at investment bank Goldman Sachs and private equity firm The Blackstone Group. He co-founded GSC in 1994.

While GSC has invested in both China and real estate debt, this is its first foray into direct real estate investment. Last summer, the firm launched GSC Capital Corp, a REIT that invests in real estate-related securities, whole-loan mortgages, bank loans, corporate loans and asset-backed securities. Last summer, Tishman Speyer also announced plans for a joint venture in India with ICICI Venture Funds Management, the subsidiary of one of the country's largest banks, to invest in Indian real estate.

AIG buys Tokyo property
Insurance company American International Group has reportedly agreed to purchase the Marunouchi Trust Tower, a redevelopment property in central Tokyo, from Japanese real estate developer Mori Trust for 400 billion yen ($3.4 billion; €2.8 billion). The site includes a 19-story tower and an adjacent lot where a 37-story commercial building is planned for completion in 2008. The mega-deal is reportedly the largest in the country since 1995 and is seem by some to represent a turnaround in the Japanese real estate market, with rumors of a deal in December prompting a rally in Japanese property stocks.

Credit Suisse in Beijing joint venture
DLJ Real Estate Capital Partners, the private equity real estate arm of newly renamed investment bank Credit Suisse, is teaming up with Tianhong Real Estate, a subsidiary of Chinese investment firm Beijing Tianhong Real Estate Development and Management, to develop a mixed-use property near Tuanjie Lake. The JV, which is Credit Suisse's first direct investment in China, plans to develop a 70,000 square meter office and retail complex on the east side of downtown Beijing. Terms of the agreement were not disclosed. Partner Beijing Tianhong is also reportedly contemplating a future Hong Kong listing, which could be worth more than $200 million (€164 million).

Siachen, Nitesh team up for India JV
New York-based Siachen Capital and Nitesh Estates, the real estate arm of Bangalore, India-based Nitesh Group, are teaming up for property investment in the Asian subcontinent. Siachen will reportedly provide Nitesh with $100 million (€82 million) for investment in residential and commercial property in India; the money is reportedly coming in the form of a $30 million initial commitment and a $70 million follow-on investment. Siachen Capital investors include Miguel Forbes of the Forbes magazine fortune.

Bessemer, New Vernon invest in Indian hotels
Mumbai-based hotel group Sarovar Hotels has raised $8.5 million (€6.9 million) of venture capital from two US private equity firms, Bessemer Venture Partners Trust and New Vernon Private Equity. The capital will be used by Sarovar to fund the launch of the new Hometel line, a budget hotel concept; the company plans to invest a total of $44 million in the venture and open 50 Hometels in India in the next five years. The first Hometel was scheduled to open in Bangalore in January.

Savills enters Korean RE market
UK-based property service group Savills has formed a joint venture with Korean real estate company KAA/BHP Korea in an effort to enter the country's real estate market. Savills provides a number of property services, including sales, acquisitions, valuations, development, property management, auctions, planning and market research, and is already active in China and Hong Kong, Japan and Southeast Asia. KAA/BHPK manages a number of properties in Korea, including the Seoul Finance Center, Star Tower and Prime Tower.