Chinese government-backed China Resources Land announced to the Hong Kong Exchange on Friday that it has teamed up with Shanghai Land and China Life Insurance to launch an RMB 15 billion ($2.7 billion) real estate investment fund. The information was confirmed by China Life on Monday on its WeChat official account.
The mainland’s 11th largest real estate developer in terms of sales said the fund will be mainly used for investing in office properties, hotel projects, commercial properties, long-lease apartments projects, and related service projects. Of the RMB 15 billion in equity, China Resources will contribute RMB 2.4 billion, representing 16 percent of the total capital commitment to the fund.
The new fund paves the way for China Life, which has $520 billion in assets under management and is ranked as China’s largest insurer, to play an even bigger role in one of Asia’s most valuable real estate markets.
Preparing to Invest RMB 15B in Shanghai
China Life, which will contribute RMB 9 billion for its majority stake in the city development fund, said in its official WeChat account that the investment vehicle will be used for acquiring projects in Shanghai’s core locations.
According to China Life Insurance, the eight year fund will be managed by an asset investment management platform affiliated with China Life Investment Holding, named PE, a pension and property management services provider.
The RMB 15 billion fund first began to take public form this August, when Shanghai Land, China Resources Land, and China Life signed a cooperation agreement in Beijing. In that deal, the three parties agreed to establish a company to manage the RMB 15 billion fund by the end of August.
Developers to Seed Fund With Existing SH Projects
At the same time that the national government-backed trio announced the August deal, the new partners also revealed that a Pudong district plot acquired by Shanghai Land will be the first seed project for the fund.
According to local media reports, Shanghai Land acquired Pudong plot B06, located across Shibo Avenue from the 2010 Expo Centre, in September last year for an auction reserve price for RMB 3.8 billion. The 47,800 square metres site is located just one block east of the Huangpu River, and was approved for development into a commercial complex including offices, restaurants, and tourism facilities.
While the new partners did not specify further projects to be acquired by the fund, China Resources Land mentioned that the investment vehicle “will enhance the Group’s avenues of property investment and improve the overall efficiency in its use of available capital.”
The Shenzhen-based developer acquired 41 land parcels for RMB 67.29 billion in the first half of 2018, according to the company’s interim report.
China Life Already a Top Buyer in Shanghai
China Life Insurance, a government backed provider of life, medical and commercial insurance, is an active player in domestic and overseas real estate market, and has already made some of the biggest property acquisitions in Shanghai.
In 2016 a China Life-backed fund managed by ARA Asset Management made one of the biggest property buys ever in China’s commercial capital when it bought the Century Link commercial complex in Pudong from Li Ka-shing’s Cheung Kong Property Holdings (now CK Asset) and affiliates of his Li Ka Shing (Overseas) Foundation for RMB 20 billion.
The purchase in Pudong district set an all-time price record for the purchase of a single asset in Shanghai, as well as a high-water mark for the sale of a single property across the Asia Pacific market in 2016.
China Life followed up on the Century Link tower acquisition in October 2017 when it purchased a 49 percent in Shui On Land’s Knowledge and Innovation Community (KIC) project in Shanghai for RMB 2.95 billion. Then in December last year, the insurer bought just under 50 percent of Shui On’s Ruihong Xincheng project in Shanghai’s Hongkou district for RMB 4.16 billion.
In February of this year, China Life joined with Global Logistic Properties to form a new RMB 10 billion ($1.6 billion) value-add fund targetting logistics opportunities in China.
The company which is 70 percent owned by the Chinese government now ranks 51st on the Fortune Global 500 list and has some $483 million in assets. Last May, China Life Insurance bought a 95 percent stake in a portfolio of US logistics and other assets valued at $950 million.