TAN-EU China club fund completes first investment

The Hong Kong-based private equity real estate firm and its joint venture partner SOCAM Development have put RMB260m to work acquiring a 1m sq ft development site in Wuqing, Tianjin.

TAN-EU Capital, the Hong Kong-based private equity real estate firm headed by ex-Macquarie Capital Advisors fundraiser Rachel Renucci-Tan, has completed its first investment since closing the capital raising for its first investment vehicle.

On behalf of SOTAN China Real Estate I, a $400 million club fund, 50:50 managed with SOCAM Development, one of the listed companies of Hong Kong conglomerate Shui On Group, the firm has acquired a 1 million square foot vacant site in Wuqing, Tianjin from a local investor.

In its announcement of the transaction, TAN-EU did not disclose a sale price but PERE understands the total cost for the site was RMB260 million (€31.3 million; $41.35 million) of which RMB234 million was equity from the JV fund.

The site comes with planning consent for 484,380 square feet of two to three floor shops, a 322,920 square foot shopping mall, 430,560 square feet of residential and a 700-space car park. The total development cost for the site is expected to be RMB669 million although that cost would include debt.

In its announcement, TAN-EU said it was attracted to Wuqing’s economy and population which it said had grown in 2010 by 21.1 percent and 12.7 percent year on year respectively. Renucci-Tan said the investment was in line with the firm’s strategy of targeting under-developed areas with strong growth potential accelerated by improving infrastructure. She said the development would likely benefit from already successful schemes in the area.

She said: “The site is adjacent to the popular Florentia Village Outlet mall which specializes in selling luxury branded goods at factory outlet prices and attracts thousands of visitors from Beijing and Tianjin. Our project will create a synergy by offering a variety of fashion, F&B and convenience based stores and will not only benefit from the demand of local residents but also Beijing and Tianjin day trippers.”

SOTAN China Real Estate I closed in February last year. Its equity was contributed $200 million by European institutional investors and $200 million by SOCAM from its balance sheet. The 6-year vehicle, which was closed within 14 months of the start of fundraising, is expected to generate an IRR of between 18 percent and 20 percent from its investments.

Paul Hastings was the legal advisor to TAN-EU for the investment.