RRJ eyes US$1b for China real estate fund

Private equity firm RRJ Capital has begun marketing a potential US$1 billion Asian real estate fund focused on China in its second major capital-raising effort of the year after securing US$3.6 billion from investors in a record-setting six months earlier this year.

"We're aiming for a US$500 million fund with a focus on China. If the demand is there, we may raise the size of the fund to US$1 billion," RRJ chairman and chief executive Richard Ong told the South China Morning Post in his first interview since setting up the company in 2011.

The timing for a China property fund could hardly be trickier, with Beijing repeatedly clamping down on speculation to curb soaring home prices.

Government officials fear that a decade of almost uninterrupted annual double-digit gains in prices has pushed housing costs far beyond the reach of the country's emerging urban middle class, raising the risk of social tension, which the Communist Party is anxious to avoid.

Ong said there were risks, but not for residential developers that were building to sell property to the world's fastest-growing middle-class consumer sector, and rather for firms acquiring land banks to speculate on price appreciation.

RRJ wants companies that are manufacturing housing inventory and selling it - a classic cash-flow business that relies on good management, good cost control and good products.