Citic Capital to accelerate UK, US and Japan property investment, despite capital flight curbs

‘Chinese investors needing to put capital overseas for diversification, will continue to be a sign of the times,’ says Stanley Ching, firm’s head of real estate

PUBLISHED : Tuesday, 13 December, 2016, 4:23pm
UPDATED : Tuesday, 13 December, 2016, 7:59pm

Citic Capital, the Chinese state-owned asset management firm, is looking to accelerate its overseas investment in Britain, the United States and Japan to meet growing demand from clients, despite China stepping up its efforts at tightening capital outflows.

“Chinese investors needing to put capital overseas for diversification, will continue to be a sign of the times,” Stanley Ching, head of real estate at Citic Capital, told the South China Morning Post.

He added the investment house is on track to make investments in the UK, the US and Japan, and is also looking at opportunities in Hong Kong and Southeast Asian countries.

Established in 2005, Citic Capital’s real estate business has been largely focused on the mainland market in the past, investing in some 20 projects with a collective asset value of over US$8 billion mainly in residential, retail and commercial properties.

In May, however, it teamed up with China’s Cindat Capital Management to buy a major stake in an ongoing, 32-unit luxury London residential property development project being built at 60 Curzon Street in London, for around US$155 million.

Although its first London project has been hit by pound’s Brexit plunge, Ching said Citic Capital will continue to push on with its invest activities in Britain and elsewhere in the West.

“What we do is long-term investment, usually 5 to 8 years. It is difficult to hedge currency risks for such a long period, and our investors are fully aware of that,” he said.

“But we won’t become over-leveraged – that could become a serious problem.”

Ching added that China’s tightened capital outflow controls are unlikely to affect the firm’s acquisition of overseas real estate assets, which are individually typically no more than US$200 million, he said.

China unveiled new capital controls a fortnight ago, which includes halting foreign real estate deals by state-owned enterprises worth more than US$1 billion.

We see huge potential for redevelopments. Many apartments were made more than two decades ago after China’s reform and opening up, which have good locations but poor design and quality
Stanley Ching, head of real estate,Citic Capital

Domestically, Ching said there are also a lot of new investment opportunities, particularly in urban renewal.

Citic Capital jointly formed an investment management platform with domestic developer Landsea Green Properties in September aimed at urban renewal, with a targeted total investment of about 20 billion yuan.

“We see huge potential for redevelopments. Many apartments were made more than two decades ago after China’s reform and opening up, which have good locations but poor design and quality.” Ching said. “If we can change their use and refurbish them, they will become very popular.”

The firm is also keen on developing youth-targeted, mini-sized rental apartment blocks – units which can deliver a 5 to 6 per cent annual return, already higher yielding than office buildings or general apartments in first-tier cities, he added.

Ching said Citic Capital plans to raise more yuan-denominated capital because of the ample amounts of domestic liquidity available, and as Chinese investors are willing to take more risks when looking at new opportunities.