Star Capital, backed by a clutch of China's super-rich, including Jack Ma Yun and Guo Guangchang, is well on its way to raising the mainland's largest private equity property fund, with a target of up to six billion yuan (HK$7.52 billion).
It also plans to launch a property fund in Hong Kong, hoping to attract as much as US$200 million in offshore capital seeking investments in the mainland's property market.
Jason Huang, a vice-president of Star Capital, said: "The powerful investors give the fund the clout to bargain on land prices with local governments. The officials hope to attract businesses run by Ma Yun and Guo Guangchang."
Star Capital, established in October 2010 to make the most of the country's urbanisation drive, manages a combined 5.6 billion yuan in the two funds it has already launched.
The investors in the latest proposed fund, due to be launched within the year, will limited partners. They include Guo, chairman of the investment conglomerate Fosun Group; Ma, founder of the e-commerce giant Alibaba; and Wang Jianlin, chairman of the developer Dalian Wanda. Zhao Hanzhong, a former executive of Gemdale Group, is the chief executive and general partner of Star Capital, which also manages the properties after its investment.
Star Capital is targeting to raise at least 4.5 billion yuan for its third fund, a sum that could reach as much as six billion yuan, Huang said. The annualised return could hit 20 per cent, he said.
"By uniting the … tycoons, Star Capital hopes to ensure the successes of the investments with the support of the investors," Huang said. "We will try to avoid paying a premium for land auctioned by the governments."
Earlier this month, Star Capital won a parcel of land in Shanghai's northern Zhabei district, which covers a gross floor area of 160,000 square metres. The cost per square metre worked out at 8,600 yuan, below the market average, and was described by analysts as a lucrative deal.
The owners of top privately owned business groups such as Alibaba and Fosun are welcome by local governments as partners in property funds, because officials hope to draw in those companies to create jobs locally. Their hope is that property projects developed by Star Capital, most of which are mixed-use commercial properties, will see the limited partners' companies taking space in them.
China's rising middle class, and the government's determination to speed up urbanisation are big driving forces for the commercial property sector.
Retail sales on the mainland account for about half of all sales in the Asia-Pacific region, and the bullish outlook for the sector has brought an influx of capital into investment properties in the mainland's top cities.