Tishman Speyer eyes more China funds amid country’s reopening

The firm will offer different strategies for domestic and offshore investors according to their risk-return appetite.

China continues to be a “very important market” for Tishman Speyer, despite the covid lockdown and geopolitical issues over the past few years, according Wilson Chen, chief executive officer for the firm’s China business.

PERE can reveal that the New York-based firm plans to raise more dollar-denominated real estate vehicles focusing on the country, as it is in the process of liquidating its Tishman Speyer China Fund, which was launched in 2008. Last week, the firm announced the sale of The Springs Center, the last remaining asset in the fund, to Singapore’s CapitaLand for $1.1 billion.

Chen told PERE that the country’s recent end of its “zero-covid” policy has sent a “strong positive message” to its investors although the firm’s long-term commitment in China has remained unchanged.

For foreign investors, the country’s reopening of its borders is a big signal for them to reevaluate their investments in the country, according to Chen. “I think most of the offshore investors are watching the Chinese market. They are hesitating to make big decisions on investments. But now that they are allowed to come to China, they can visit the projects and assets, it is very important and it’s definitely good news for them,” he explained.

In general, the Chinese real estate industry will be a great beneficiary of the opening up as “people flow” is very important for businesses, he added. “The zero-covid policy in China had sustained for two years and I think there is a huge expectation from the Chinese population. They are looking forward to the opening up and you can see that the government is doing a right thing, so it’s definitely good news,” he explained. He thought traditional real estate classes such as retail and hotels will see an uptick in demand with people are finally able to commute without restrictions.

However, Chen recalled traditional real estate sectors were having a difficult time during the lockdown and this has led to a shift in foreign investors’ interest from these property types to new economy sectors such as life science and multifamily. Such change in investors’ appetite has therefore steered the firm to look into these emerging strategies.

“Traditional asset classes will be really challenging to raise capital. Offshore investors probably want to focus on assets with stable income and we have started looking into alternative asset classes in recent years. For example, logistics and life science have a really promising future in China. The other one is rental apartments as the young generation in China has a strong demand for quality living space,” he explained. He noted that offshore investors will be more selective going forward as China’s geopolitical issues remain concerns for them despite the country’s reopening.

Additionally, Tishman Speyer will continue to launch more Chinese-yuan denominated funds in the country. Since first entering the country in 2006, the firm has raised a total of 32 billion yuan from domestic investors across 11 Chinese-yuan denominated funds and co-investment vehicles.

“Back then, the Chinese capital market was still at a preliminary stage, but we looked at it with a long-term view. This strategy has been proven right with the huge wealth creation in the country in the last 30 years,” he said. He pointed out some of these Chinese investors have also become investors in the firm’s global projects in which they committed over $1 billion between 2012 and 2017.

Meanwhile, Tishman Speyer will have different offerings for domestic investors as Chen expected some of these investors would continue to look at traditional property types. “I think the Chinese capital is different. So the story is a little bit different. The private developers are suffering from the USD bonds in Hong Kong and some of the Chinese capital thought it is a good time to buy some distressed assets right now. We can provide this kind of investment and asset management service,” he said.