German insurance giant Allianz Group is ramping up its real estate investments in China by partnering with Gaw Capital and TH Real Estate on a planned $2 billion fund targetting high-end outlet malls across the country.
The vehicle, ERES APAC II – China Outlets, has raised $550 million in a first close from three investors including Allianz Real Estate, Hong Kong private equity shop Gaw, and a German asset management firm based in Frankfurt, Mingtiandi has learned from a representative of TH.
The fund seeks to raise about $750 million and will be seeded with two existing properties from the Florentia Village chain of discount luxury malls. The partners aim to grow this seed portfolio to around $2 billion over the next five years as additional Florentia Village outlets are brought into the fund.
As the anchor investor, Allianz will own 30 percent of the platform, with Gaw acting as co-capital sponsor. TH Real Estate, the investment management giant with a $7 billion global outlet mall portfolio, will manage the fund while RDM Asia – part of Italy’s Fingen Group and owner of the Florentia Village brand – will manage the assets.
Allianz Joins with TH To Invest in China Outlets
The vehicle was first announced in June 2016, when TH joined with Gaw Capital to launch the China Outlet Mall Fund, saying they planned to build the fund’s portfolio to $2 billion within five years. Now rebranded as ERES APAC II, the fund will initially acquire Florentia Village Jingjin – located in Tianjin’s Wuqing district, close to Beijing in northeastern China – and Florentia Village Shanghai.
“RDM Asia has implemented a unique single point-of-sale operating model and has done an excellent job to stabilize the Jingjin and Shanghai assets,” commented Rushabh Desai, Asia-Pacific CEO of Allianz Real Estate in a statement. “We look forward to replicating our European outlet mall performance in China.”
The Beijing-area mall opened in June 2011 as the first Florentia Village project in China. The 70,000 square metre suburban venue, which is designed to resemble a classical European town, sells premium brands from Gucci to Prada at steep discounts – tapping a market for affordable luxury products within driving distance of a major urban centre.
Florentia Village Brings Affordable Luxury to More Cities
The success of the pioneering project led TH Real Estate to help set up Silk Road Holdings, a joint venture with RDM and Gaw Capital, aimed at replicating the Florentia Village model elsewhere in China. The group opened the second outlet, Florentia Village Shanghai, near Pudong airport in February 2015.
The Shanghai mall’s phase one spans 63,000 square metres with around 3,000 parking spaces, and a 27,000 square metre phase two is planned. A total of RMB 1.5 billion (around $226 million) is being invested in the project, according to the Florentia Village website.
The Florentia Village chain has since expanded to Foshan (near Guangzhou in south China), Hong Kong, and Ezhou (near Wuhan in central China). In addition to these five completed properties in Greater China, Florentia Village aims to open further venues in the southwestern city of Chengdu, followed by another outlet in the region’s Chongqing metropolis next year.
“We have seen this niche sector continue to gain in popularity with China’s brand conscious consumers,” said Chris Reilly, managing director for Asia-Pacific at TH Real Estate in the statement. “Seeded with two leading designer outlet malls, the fund has also identified a future pipeline of assets,” the executive added.
Allianz and TH have previously worked together on the Europe Outlet Mall Fund in 2004 and UK Outlet Mall Fund in 2008. TH Real Estate is an affiliate of Nuveen, the investment management arm of US financial giant TIAA.
Global Investment Managers Boost Asian Exposure
TH is stepping up its activities in Asia Pacific, with $2.4 billion of assets under management in the region including the recently unveiled China outlet fund.
For Allianz Real Estate, the $63.5 billion property investment arm of Allianz, the deal with TH is also part of a broader push to allocate around five percent its global real estate portfolio to the region, up from just one percent last year.
The insurer and asset manager told Reuters that Asia Pacific will account for just over three percent of its global portfolio by the end of 2017, and has announced nearly $1.9 billion in investments and funds targetting Asian properties in the past three months.
In August, the firm announced a co-investment deal with Singapore’s Keppel Group to buy the 70,042 square metre Hongkou SOHO project in Shanghai for $525 million, with Allianz Real Estate investing in Keppel’s Alpha Asia Macro Trends Fund (AAMTF) III.
Allianz also made its first foray into the Japanese logistics sector in September, by committing $100 million to a fund managed by warehouse builder e-Shang Redwood (ESR). In October, the firm announced a partnership with India’s Shapoorji Pallonji Group to set up a $500 million vehicle targetting a mix of office assets across India.