GoHigh Capital and Thailand’s Charoen Pokphand Group are dialling in on China’s push for revitalising its cities with the formation of a RMB 10 billion ($330 million) urban renewal fund.
On 7 January the Beijing-based private equity real estate firm, which manages total investments of over RMB 42 billion, signed an agreement with the Thai conglomerate, which is already among the largest foreign investors in China, to jointly set up a fund to invest in urban renewal projects across China’s largest communities.
Formally known as the Urban Regeneration Fund, the 50:50 joint venture will target investment opportunities in retail, office and commercial mixed-use projects, primarily in first tier and upper second tier cities.
Revitalising Aging Buildings
“The focal point of the cooperation between CP Group and GoHigh Capital will be to revitalize previously sub-prime properties, to re-gentrify areas to realize value, and to awaken the life cycle of real estate assets,” GoHigh Capital said in a statement.
While a number of potential assets are in place to seed the fund, a GoHigh spokesperson told Mingtiandi that the company could not disclose the details of any initial pipeline at this time.
The formation of the joint venture comes just three weeks after Chinese Vice Premier Han Zheng highlighted urban renewal as a key element of the government’s push for sustainable urban development.
“After 40 years of urbanization and large-scale construction, cities in China will undergo an era of urban regeneration, which brings important opportunities for the real estate industry,” GoHigh said in a statement.
Balancing Economics and Culture
The ten-year-old private equity firm will be looking to benefit from the financial muscle of CP Group, which recorded a total revenue of $68 billion in 2018, as well as the group’s experience as a real estate investor in China.
Controlled by Thailand’s richest man, Dhanin Chearavanont, CP Group’s investment in the country’s real estate sector date back to the early 1990s when it invested in the development of Shanghai’s Lujiazui financial district, with the company also participating in mainland real estate investments through Chinese insurance giant Ping An Group, where it holds the largest single stake.
Among CP’s existing mainland projects are nine shopping malls in China including the Super Brand Mall in Lujiazui and other shopping centres in Shanghai, Beijing and Hefei under the Touch Mall, and Lifestyle Mall brands.
Expanding GoHigh’s Urban Renewal Footprint
For GoHigh Capital, the collaboration with the Thai giant follows a series of repositioning plays in Shanghai and Beijing.
Just six months ago, the firm announced the acquisition of the Wangfujing department store in Beijing’s Huangcun area through a RMB 5 billion urban renewal fund established with mainland developer Grand Joy Holdings in August 2018.
The 50:50 JV with mainland commercial developer Grand Joy, (formerly known as Joy City), aims to convert the department store into a 150,000 square metre (1.6 million square foot) shopping mall.
A year prior to that announcement, the private equity fund manager exited its investment in Beijing’s Xinjiegaohe office building for an undisclosed sum after carrying out repositioning works.
Located at the intersection of Beijing’s Xinjiekou North Street and the North Second Ring Road, GoHigh had acquired the property from Singapore’s Frasers Property Group in 2015, when it was still used as a shopping centre.
CP Family Among Thailand’s Property Giants
Famous in Thailand as the owners of the country’s biggest agribusiness conglomerate and for controlling telecom giant True, the Chearavanont family also has extensive real estate holdings.
Through Magnolia Quality Development Corporation, which is run by Khun Dhanin’s daughter Thippaporn Ahriyavraromp, the family is invested in the development of Bangkok’s most expensive ever development.
MQDC announced just three weeks ago that it was increasing investment in its 48-hectare (119 acre) The Forestias development on the outskirts of Bangkok from $2.98 billion to $4.14 billion.
In Thailand CP has partnered with Shanghai-based Greenland Group, including signing a deal with the state-backed developer in 2014 to jointly develop luxury homes in Thailand.
Gentrifying China’s Cities
With the government supporting urban renewal and new sites becoming harder to secure, there has been a shift toward redevelopment as an approach to implementing commercial real estate project in China during recent times.
Four months ago, KKR partnered up with Shanghai-based fund manager HiTone Capital to acquire a ten-year-old B grade property near the city’s historic Bund waterfront for an undisclosed amount, which the 50:50 JV is converting into a 17,000 square metre mixed-use development that will become part of HiTone’s “Neo” commercial portfolio.
US private equity firm Warburg Pincus, which co-founded logistics developer ESR, is also pursuing redevelopment opportunities on the mainland through a joint venture with Shanghai-based operator Creater. In late 2018 the two partners announced that they planned to invest $300 million to reposition ageing buildings into grade A commercial properties across China.