New HSBC-NF fund snatches Beijing landmark
The private equity fund has raised $700 million to invest in Greater China real estate.
HSBC NF China real estate fund, managed by HSBC NF Investment Specialist, a joint venture between the real estate investment arm of HSBC and property developer Nan Fung Group, has recently raised $700 million to invest in the Greater China market, including the mainland, Macau, Hong Kong and Taiwan.
HSBC and Nan Fung Group shared $200 million of the fundÆs seed money equally. In this venture, HSBC will provide its fund raising expertise and asset management capability, while Nan Fung will provide support on the property technical knowledge in investing in Chinese real estate.
To date, it has invested in three projects in China. The fund has recently purchased a 100,000 square meter project on the Beijing landmark 1 Financial Street. Upon completion in ten monthsÆ time, it will provide a two-block office tower that will reach to 20-storey high.
Second, a 220,000 square meter logistics centre is under construction in Dalian û a favorite destination of Korean and Japanese companies that are looking to open the China market. Third is a specialist sector property of 120,000 square meters in Guangzhou.
Stephen Yuen, chief executive officer at HSBC NF Investment Advisor, says the fund is on the look out for investment opportunities across all sectors: ôOther than first-tier cities, we are also turning our attentions to second-tier cities, like Dalian, Suzhou, Chengdu and Chongqing, where the market is still quite behind. As property prices are concern, there are wider margins to offer to investors.ö
Anticipating steady GDP growth and the ChineseÆs increased spending power, the fund will invest in a vast array of projects from residential real estate, to commercial properties and retail spaces.
According to a recent Jones Lang Lasalle report, sustained growth can be foreseen over long term as expansion of multinational companies continues in the China market, putting strain on supply for quality office space and high-end residential properties. Even as costs are rising in cities like Hangzhou, Nanjing, Chongqing, XiÆan and Tianjin, their average rent range is only half to one-third to the levels of first-tier cities like Shanghai.
In some cities, such as Chengdu, price level for residential properties has surged by as much as 50% over the past year. Yuen believes property investments will remain as a preferred asset class for Chinese investors, and is likely to see continued growth over the long term. Local property markets are propelled under a low interest, high inflation environment. Yuen says, ôI see no reason the market will fall drastically,ö as the Chinese are tapping into low cost capital.
Yuen is positive on renewed enforcement of foreign capital access to Chinese real estate. He believes the new regulations can bring stability in property prices for long-term investors. ôThe control on the conversion of US dollar to the renmenbi actually means that more time has to be spent on the completion of procedures,ö and investors of low calibre will eventually be weeded out. ôSpeculators are discouraged against the æhit and runÆ approach,ö he says.
He says investors can still find ease in exiting projects in a number of ways, such as selling a holding company or releasing a project into market by individual units û which in fact, is a more profitable strategy under a surging market.
He also notes the standard of investment framework in China has improved over the past ten years. As the frontier of real estate investment shift from costal cities to inner provinces, old challenges, such as bureaucracy and access to markets have largely been removed.
There is, however, still one hurdle that an intrepid property investor must overcome, Yuen says: ôDrinking baijiu.ö
For an in-depth look at investing in Chinese real estate, see the September edition of AsianInvestor magazine.
HSBC and Nan Fung Group shared $200 million of the fundÆs seed money equally. In this venture, HSBC will provide its fund raising expertise and asset management capability, while Nan Fung will provide support on the property technical knowledge in investing in Chinese real estate.
To date, it has invested in three projects in China. The fund has recently purchased a 100,000 square meter project on the Beijing landmark 1 Financial Street. Upon completion in ten monthsÆ time, it will provide a two-block office tower that will reach to 20-storey high.
Second, a 220,000 square meter logistics centre is under construction in Dalian û a favorite destination of Korean and Japanese companies that are looking to open the China market. Third is a specialist sector property of 120,000 square meters in Guangzhou.
Stephen Yuen, chief executive officer at HSBC NF Investment Advisor, says the fund is on the look out for investment opportunities across all sectors: ôOther than first-tier cities, we are also turning our attentions to second-tier cities, like Dalian, Suzhou, Chengdu and Chongqing, where the market is still quite behind. As property prices are concern, there are wider margins to offer to investors.ö
Anticipating steady GDP growth and the ChineseÆs increased spending power, the fund will invest in a vast array of projects from residential real estate, to commercial properties and retail spaces.
According to a recent Jones Lang Lasalle report, sustained growth can be foreseen over long term as expansion of multinational companies continues in the China market, putting strain on supply for quality office space and high-end residential properties. Even as costs are rising in cities like Hangzhou, Nanjing, Chongqing, XiÆan and Tianjin, their average rent range is only half to one-third to the levels of first-tier cities like Shanghai.
In some cities, such as Chengdu, price level for residential properties has surged by as much as 50% over the past year. Yuen believes property investments will remain as a preferred asset class for Chinese investors, and is likely to see continued growth over the long term. Local property markets are propelled under a low interest, high inflation environment. Yuen says, ôI see no reason the market will fall drastically,ö as the Chinese are tapping into low cost capital.
Yuen is positive on renewed enforcement of foreign capital access to Chinese real estate. He believes the new regulations can bring stability in property prices for long-term investors. ôThe control on the conversion of US dollar to the renmenbi actually means that more time has to be spent on the completion of procedures,ö and investors of low calibre will eventually be weeded out. ôSpeculators are discouraged against the æhit and runÆ approach,ö he says.
He says investors can still find ease in exiting projects in a number of ways, such as selling a holding company or releasing a project into market by individual units û which in fact, is a more profitable strategy under a surging market.
He also notes the standard of investment framework in China has improved over the past ten years. As the frontier of real estate investment shift from costal cities to inner provinces, old challenges, such as bureaucracy and access to markets have largely been removed.
There is, however, still one hurdle that an intrepid property investor must overcome, Yuen says: ôDrinking baijiu.ö
For an in-depth look at investing in Chinese real estate, see the September edition of AsianInvestor magazine.
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