Declining asset values inspire Phoenix to move into mainland real estate market

Phoenix Property Investors, a Hong Kong-based private equity fund, has set its sights on investing in the mainland property market despite government measures to contain demand and price growth in the sector.

'It is a good time to invest in the market as asset values have been falling and investment opportunities rising,' said Samuel Chu, a managing partner and chief investment officer for the fund.

'The tightening lending policy introduced by the central government has forced some cash-strapped developers to dispose of some of their assets to improve their cash positions - and that has created buying opportunities.'

As a measure of its commitment, the fund invested more than US$100 million to take a 25 per cent stake in a retail development in Shanghai's Jingan area at the end of last year, shortly after Beijing began stepping up measures to control runaway demand in the overheated property market.

Mr Chu said the fund was attracted to the investment because of the prime location and the nature of the product. 'As the financial hub of China, we expect Shanghai retail property to show promising prospects,' he said.

The investment was a first for Phoenix in the mainland property market even though the fund had been set up with a mandate to focus on the Greater China and Asian region when it was formed in 2002.

'The market was overheated a few years ago,' Mr Chu said. 'Everyone was chasing after mainland properties and the situation reminded us of the previous booms in 1992 and 1993 and the crashes that followed soon after.'