US Pension Fund Revealed as Backer of HK$420M Buy of HK Apartment Tower

The buyer of a serviced apartment building at 111 High Street in Hong Kong has been revealed by market sources as a recently formed private equity fund manager backed by a US pension fund.

Hong Kong-based Crane Capital has agreed to buy the property in the city’s hipster-favoured Sai Ying Pun area from tycoon Payson Cha’s Hanison Construction Holdings for HK$420 million ($54 million), as reported by Mingtiandi two weeks ago.

Crane Capital, which is headed by former Evergreen Real Estate Partners managing director Wai Tang, is backed by the Washington State Investment Board, and targets real estate opportunities in Asia.

The firm is paying the equivalent of just over HK$20,720 per square foot for the 19,792 square foot (1,883 square metre) property that had earned profits after tax of HK$6.75 million for the financial year ended 31 March 2019.

The acquisition comes only three months after Crane was spun off from real estate investment platform Evergreen Real Estate Partners, a $5.7 billion real estate investment fund set up by the US pension fund and London-based private equity firm M3 Capital Partners.

Hanison Flips Former Ovolo

Crane Capital is purchasing the residential block at a 66 per cent mark-up over the HK$253 million which Hanison paid four years ago for what was then known as Ovolo 111 High Street, with the building having been originally developed by Hong Kong-listed Kerry Properties.

Hanison said in its statement to the stock exchange two weeks ago that current market conditions present a good opportunity to unlock the value of the investment, adding that the capital would be reallocated into future investment and growth opportunities.

Two-bedroom units in the property, all of which measure 790 square feet, are currently renting for HK$54,000 per month, with Apple TV and laundry services included, according to online leasing sites, with some of the units enjoying partial views of Victoria Harbour.

US Pension Fund Takes Aim at Asia

The Washington State Investment Board, which has limited exposure in Asia, is partnering with Crane Capital in a push to increase its asset portfolio in the region, which currently stands at just over 4 per cent of the pension fund’s overall $17.2 billion real estate portfolio, following recommendations made at the pension fund’s private markets committee in February.

The pension fund committed $250 million in capital for investment by Crane, and arranged for the transfer of $400 million of assets from Evergreen Real Estate Partners to the new entity’s portfolio.

Market sources report that Crane is currently targeting a site for redevelopment in Central after acquiring a pair of buildings on Sheung Wan’s Bonham Strand.

Building on Evergreen’s Experience

Since it was established by M3 fourteen years ago, Evergreen Real Estate Partners, which spun off Crane Capital in February of this year, has built up a portfolio of specialised property assets including student accommodation, self-storage, funeral homes and apartment blocks in Europe, North and South America and Asia.

Just two months ago parent firm, M3 Capital Partners, announced it had put up for sale the Australian arm of student accommodation provider Urbanest on behalf of Evergreen Real Estate Partners at an asking price of $2 billion.

The fund had purchased the 10,000 bed portfolio in 2014, which operates 22 purpose built blocks with around 10,000 beds in Sydney, Melbourne, Brisbane, Adelaide and London.

Evergreen’s portfolio also includes the UK operator of motorway service areas Extra MSA, which it acquired out of administration from Lloyds Banking Group in 2010, and the Japanese self-storage group Quraz, which holds a 20 per cent market share and was acquired in 2013.

Seven months ago, Washington State Investment Board committed an additional $500 million to Evergreen Real Estate Partners.