Project Sycamore includes four buildings around a courtyard
With credit to China’s property sector tightening since the introduction of the Three Red Lines policy last year, US private equity major Warburg Pincus has teamed up with Shanghai-based asset manager Wensheng AMC to create a “special situations” platform to invest in underutilised real estate.
The two parties are committing up to $600 million to the platform, dubbed Wensheng Special Situations Asset Management Co, which will provide single credit services tied to specific assets under strategies including non-performing loan-to-own, rescue financing and other special situations.
Seeded with assets in Shanghai, Zhejiang and Hainan, the platform aims to bring total assets under management to $5 billion over the next five years, New York-based Warburg Pincus said in a release.
“In light of the ongoing financial reform in China and the continued regulatory development, the real estate special situations sector is entering an accelerated growth trajectory,” said Qiqi Zhang, managing director of Warburg Pincus. “Through the partnership with Wensheng, we look forward to leveraging the complementary strengths and abundant resources of both parties to acquire high-quality assets and positively contributing to the growth of the Chinese economy.”
Dedicated Team
Founded in 2006, Wensheng set up its distressed property assets restructuring department in 2017, followed by the formation of a dedicated team in 2018.
Warburg Pincus managing director Qiqi Zhang
Wensheng founder Zhou Zhijie said China’s economic development and urban renewal demand have unleashed “tremendous opportunities” for special situations strategies.
“We are excited about the partnership with Warburg Pincus, an experienced investor with a solid know-how in real estate, especially distressed real estate investments,” Zhou said. “We are now better positioned to further accelerate our growth with all-round capabilities — investing, financing, operations and exit.”
Wensheng’s previous value-add projects include the acquisition of a four-building complex between Zhaojiabang Road and Jiangguo Road in Shanghai’s Xuhui district and subsequently arranging a fresh 50-year commercial land tenure for the former state-owned asset.
Wensheng later sold an 84 percent stake in the $112 million compound, known as Project Sycamore, to a joint venture of local startup Collab Real Estate and Hong Kong’s InfraRed NF, while retaining a 14 percent interest.
Urban Renewal in Vogue
The Wensheng deal marks the second time in a week that Warburg Pincus has announced the launch of a platform leveraging opportunities related to Chinese urban renewal.
The US firm last Thursday unveiled Golden Union Assets, a collaboration with Shanghai-based redevelopment specialist Golden Union Group, targeting RMB 50 billion ($7.7 billion) in assets under management in the next three years.
The partners aim to pursue urban renewal projects in Shanghai and Beijing through acquisition, repositioning, management and operation of underutilised assets.
Warburg Pincus didn’t disclose the amount of its investment, saying only that Golden Union Assets is the private equity firm’s largest strategic urban renewal platform in terms of assets under management.
In 2018, the private equity giant co-founded Beijing Hande Donghui Asset Management, a real estate investment company specialising in non-performing loans backed by property assets.
Last month, an affiliate of Beijing Hande sold the Happy Valley Shopping Mall in Guangzhou’s Tianhe district to Hong Kong’s Link REIT for around $501 million, after acquiring the asset in the Guangdong provincial capital in late 2019.
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