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TAN-EU lands second advisory role for troubled Trophy fund

The private equity real estate business founded by Rachel Renucci-Tan has been mandated by Shui On Land for a second time to manage its joint venture in the turbulent Trophy Property Development fund.

TAN-EU Capital, the private equity real estate business founded by Rachel Renucci-Tan, has been appointed for the second time by Hong Kong-listed developer Shui On Land to manage its joint venture in the troubled Trophy Property Development fund.

The appointment comes just two months after Shui On, Winnington Capital and its nigh-on 150-strong investor pool agreed to restructure the vehicle via an asset swap and general partner spin-out. Alongside various law firms, TAN-EU Capital was at the heart of that agreement, which brought a resolution to years of escalating tensions between the three parties.

With the purpose of ensuring that Shui On’s relationship with the spun-out general partner, a newly-launched firm called Venator Real Estate Capital Partners, and the investor pool that Venator has inherited runs smoothly, Shui On has hired TAN-EU for a second time to manage the new joint venture arrangement on its behalf. Going forward, TAN-EU Capital will be the main point of communication for Venator and for the investors, which include US institutions like TIAA-CREF, the San Diego County Employees’ Retirement System and University of Texas Investment Management as well as multi-managers and individual high-net-worth investors.

The Trophy Property Development fund was closed on more than $1 billion of equity by Winnington Capital in 2008. The fund’s original thesis was wrapped around minority investments in five master-planned developments in Shanghai, Wuhan and Chongqing. After development delays and spiraling costs led to Winnington, Shui On and the fund’s investors falling out, advisors, including TAN-EU Capital, were hired to find a resolution. With their advice, the parties agreed to switch the minority stakes for one majority stake in a development in Shanghai and that a new GP would be spun out of Winnington, led by senior principals hired by the firm after the trouble began.

While the actual asset swap is scheduled to take place early next year once the site of the Shanghai development, called Taipingqiao 116, has been cleared, the new joint venture arrangement between Shui On and Trophy is now effective. Shui On remains the developer of the new joint venture and could increase its holding under a put/call option also agreed.

In a letter to Venator and the investors, Shui On chief executive officer Freddy Lee said: “TAN-EU will ensure that all our contractual arrangements with Trophy Property Development are effectively executed and that our mutual rights are enforced and protected. We are relying on their experience in private equity funds management to be certain that we live up to the limited partners’ expectations of good governance for the joint venture, especially in the quality of our reporting, monitoring of the progress of our development according to our obligations, transparency and clear communication.” He added: “TAN-EU also will be responsible for ensuring the exit of the LPs from the JV in a timely manner, taking into account cash expatriation issues.”

In appointing TAN-EU again, Shui On is entrusting its position in the partnership to an organization with which it has an existing relationship. TAN-EU and another Shui On property development company called SOCAM Development currently are jointly managing a separate China-focused fund called SOTAN China Real Estate.

In a statement on its appointment, Renucci-Tan said: “We are delighted by this appointment, which seals our partnership with the Shui On Group as we seek to expand our private equity platform in a solid partnership with Shui On Land as well as SOCAM Development.” In order to fulfill its role as manager of the joint venture on behalf of Shui On, as well as continue to effectively manage its own fund, TAN-EU is expected to hire additional staff by the second quarter of next year.