Greater China-based private real estate investors play a substantial role in the overall Asia-focused fundraising market given the size of China’s institutional investors and Hong Kong’s importance as a capital base for real estate deals. Given the recent media spotlight on stock market volatility that has been fuelled by a faltering and unpredictable Chinese market, fundraising for Asia-focused vehicles could face a number of challenges going forward. However, China’s domestic property market may also see more investment activity from its domestic institutions due to the yuan reforms coupled with the People’s Bank of China’s loosening of monetary policy.
Among Greater China-based institutional investors, a sizeable proportion (55%) invest part of their real estate allocation through unlisted vehicles, with a greater proportion of China-based institutions favouring private funds (73%) than their Hong Kong-based counterparts (44%). Additionally, these investors maintain a strong domestic bias for their home continent; 85% of Greater China-based private real estate investors have a preference for Asia-focused funds. Some examples of institutions that are looking to invest in unlisted real estate funds over 2015 include a Taiwan-based life insurer that intends to commit to domestic-focused private property funds, as well as an investment company based in Shenzhen that is seeking exposure to China, Europe and US real estate through commitments to core vehicles.
Preqin’s Real Estate Online tracks 75 Asia-focused private real estate funds raised by Greater China-based real estate firms since 2007; these funds have accumulated an aggregate $19.7bn in institutional capital commitments. Between 2009 and 2012, fundraising remained static in terms of aggregate capital raised at $1.9bn per year, despite the number of funds fluctuating between six and 14 vehicles. It was not until 2013 that Asia-focused vehicles raised by Greater China-based managers finally surpassed this total, with 10 funds raising $4.6bn. Adding to this, 2015 so far has seen the highest amount raised by Greater-China based managers: eight funds have closed for an aggregate $3.3bn. During the same period (January to September) in 2013, there were only five Asia-focused funds closed at an aggregate total size of $1.2bn. The largest fund closed in 2015 so far is Fudo Capital III. The fund, managed by Hong Kong-based CLSA Capital Partners - Fudo Capital, invests in value added and underperforming assets which are suitable for renovation or repositioning.