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It is a dual-country, total return fund that aims to capitalise on the growth potential within India and China by developing office, retail and residential real estate within these two markets. Its assets now stand at $1 billion and it has a targeted maximum fund size of about $2 billion. After leverage at the project level, the size of the fund will be $4 billion.
The target annual returns for the fund are 20%. Drawdown and investment period is expected to be completed within three years and with a typical lifespan of around five years per investment. There is no liquidity for the fund, and the tenor is approximately eight years.
HSBC Private Bank has been given the exclusive distribution rights for high-net-worth investors via a feeder fund named the HSBC Emerging Growth Real Estate Fund. Ordinarily, tickets of $50 million have to be written in order to invest in this Mapletree fund, but for HSBC private clients, they can come in for $250,000.
Last week, the fund signed an agreement with Guangzhou Southern-Donald Scientific Technology to jointly develop a nine hectare mixed-use development in Nanhai District of Foshan City in Guangdong Province, comprising of high-end service apartments and a retail mall with a total development value of $320 million.
The fund's first project in China was Future City, an integrated residential and retail development in Beilin District, Xi'an with a total development value of approximately $144 million. Its second investment is an office block in Beijing's Central Business District with an investment value of about $121 million.
For HSBC, this is the second product from the real estate unit within its private bank. That unit was set up by ex-Colliers executive Chris Allen in 2007, in order to help their investors find access to investment and development property, either via private equity-style real estate funds or by direct physical investment. Their first product, the globally themed International Property Opportunities Fund is shortly about to close, with assets in the region of $100 million.
Investors still favour private equity assets for their higher growth, better governance structures, and diversification potential.
The recent focus on greenwashing has put bond issues under greater scrutiny. However, some market participants believe this risks paralysis by analysis.
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.