Fuzhou, China-based developer Tahoe Group is setting up a RMB 20 billion ($3.1 billion) mergers and acquisitions fund for real estate investments.
The Shenzhen-listed firm, the real estate arm of conglomerate Tahoe Investment Group, announced last week that it would launch a fund for mergers and acquisitions involving real estate projects of up to RMB 20 billion. The firm is setting up the fund with a pair of sister subsidiaries of Tahoe Investment, namely Tahoe Fuzhou (泰禾福州) and Tahoe Pingtan (泰禾平潭), a Shenzhen Stock Exchange filing shows.
Fund to Acquire High-Quality Real Estate Projects
Tahoe Group would commit a maximum of RMB 2 billion to the fund, while Tahoe Fuzhou would invest RMB 18 billion and Tahoe Pingtan RMB 5 million.
The investment is to “make use of the partnering firms to build a flexible and innovative platform for equity investment and M&A,” said Tahoe Group in the statement. “By incubating high-quality real estate projects for the company, the company’s comprehensive competitiveness can be enhanced.”
Tahoe is following a trail blazed by other developers such as COFCO Group’s commercial real estate arm, Joy City Property, which set up a RMB 11.4 billion fund for mergers and acquisitions last August. The company made a 30 percent commitment to the fund, which aims to acquire eight to ten mall projects in first- and second-tier cities in China. Joy City said the fund could help the developer transition to an asset-light operating model.
Tahoe Targets Aggressive Sales Growth
Ranked as China’s 17th largest developer by sales, with RMB 100 billion in contracts signed during 2017, according to real estate data provider CRIC, Tahoe Group has an aggressive plan for the year ahead. The company’s chairman Huang Qisen vowed at the end of 2017 to double sales to RMB 200 billion in 2018, according to local media reports.
The developer based in the capital of southeastern China’s Fuzhou province, obtained 36 projects for RMB 55.2 billion last year, 26 of them through mergers or acquisitions, according to Tahoe’s annual report. The company recorded a debt-to-asset ratio of 87.8 percent in 2017, as compared to Shimao Property’s 68.5 percent gearing ratio, which is only one rank above Tahoe by sales.
Tahoe Group has developed residential and commercial projects in around 20 cities in China including Shenzhen, Guangzhou, Beijing and Shanghai. Its parent conglomerate, Tahoe Investment, has businesses covering pharmaceuticals, insurance and hospitals.