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Peggy Sito

Citic Capital Holdings has identified three investment targets on the mainland for its newly launched US$400 million real estate fund.
'We are investing in two office building projects planned for Changfu Road in Shanghai and one residential development in Dalian,' said Stanley Ching, the managing director and head of Citic Capital's property  arm.
Mr Ching said the projects were being negotiated as the third Citic retail property fund was being arranged and the timing was appropriate since tumbling property prices on the mainland had delivered buying opportunities.
He did not reveal the total investment size of the projects but said the fund planned equity investments in a range of US$30 million to US$50 million.
'Properties in prime locations will experience lower investment risk but residential projects in the major suburban centres may come under greater pressure as they will face competition from the government's massive subsidised housing programmes for low-income earners,'  Mr Ching said.
'However, the most interesting point about China is its huge market which presents numerous opportunities.'
Citic Capital,  the investment management arm of financial conglomerate Citic Group, announced on January 12 that it had closed its Citic Capital China Real Estate Investment Fund III with subscriptions of US$400 million on December 20.
Institutional investors from Europe, the United States, the Middle East and Japan, together with  Citic Capital, raised seed money for the fund to invest in development projects in first and second-tier cities in 'affluent regions'.
These include  the Pearl River Delta, the Pan Bohai Gulf Region and other key  cities such as Chengdu, Wuhan and Chongqing.
The fund  would also invest in commercial properties with a special focus on value-adding opportunities for distressed properties. In addition, it would look for entity-level investments in leading local developers with a strategic view.
Mr Ching said the fund would also consider acquisitions as well as entity-level investments in Hong Kong-listed Chinese property  companies.
In its Fund II, launched in 2005, Citic Capital teamed up with China Vanke to invest in Foshan, Dongguan and Suzhou.
In the third fund, Mr Ching said China Vanke and Shanghai Real Estate could be  potential partners.
Commenting on the outlook for the mainland property market, Mr Ching said he expected  prices would continue to fall and developers would continue to feel the pain of contracting margins in the coming months. That process could deliver even further buying opportunities.
However, he said unlike the previous market downturn in the 1990s, there were not many distressed properties on the market at present since the quality of projects had improved.
'In the 1990s, some developers might have secured project loans through special relationships with bankers. But today banks grant loans only after a strict approval procedure.'
Against this changed financing background Mr Ching said he expected that non-banking capital would play an increasing role in supporting the mainland's property market.
By way of example the central government was at present studying the launch of a China real estate investment trust and has given the go-ahead to insurance companies  investing in the country's real estate market.



Citic Capital fund invests in Shanghai, Dalian projects