TH Real Estate and Gaw launch $1.2bn fund – Exclusive

TH Real Estate, the real estate investment management firm owned by TIAA, has brought to market its first China-focused private equity real estate fund for retail investments. The Hong Kong-based fund manager Gaw Capital Partners will be the co-capital sponsor for the vehicle.

PERE has learnt from industry sources that the two firms are targeting to raise as much as $1.2 billion via the China Outlet Mall Fund. So far the two have secured $100 million of seed capital from an undisclosed investor for the vehicle.

The China Outlet Mall Fund's corpus will be specifically invested in designer outlet malls in China.

The fund is to be seeded with two outlet malls – Florentia Village in Jing Jin and Florentia Village in Shanghai that have a gross asset value of around $850 million in total. Over the next five years, TH Real Estate is targeting to grow the fund’s portfolio to around $2 billion, the firm told PERE. Gross IRRs of around 15 percent are being targeted from the fund investments.

This will be the first fund launched by TH Real Estate in China, but the firm has prior experience of working with Gaw Capital Partners in China’s retail sector.

The two outlet malls that have been seeded into the China Outlet Mall Fund were in fact held by a joint venture partnership between TH Real Estate, Gaw Capital and other partners. In 2012, TH Real Estate, formerly known as TIAA-Henderson Real Estate helped to set up Silk Road Holdings – a consortium of investors that included Gaw Capital and the RDM Group – to develop outlet malls in China under the Florentia Village umbrella.

“This presents a rare opportunity for institutional investors to gain access to a niche sector, with a proven team,” said Chris Reilly, managing director for Asia Pacific at TH Real Estate on the new fund.

Harry Tan, the firm’s head of research, Asia Pacific, added: “China is one of the fastest growing and most lucrative retail markets in the world. Urbanization and the creation of wealth have seen Chinese consumers’ focus shift from basic needs to improving their quality of life, with an additional emphasis on brand consciousness. Luxury designer outlet malls are in prime position to benefit from these structural tends, yet supply remains at extremely low levels relative to developed markets.”