Warburg Pincus will invest up to $300 million in a new joint venture with Shanghai-based urban renewal operator CREATER to acquire and redevelop real estate projects in China’s first-tier cities, according to a statement jointly released by the two companies this week.
The US private equity giant and Creater, which operates a network of 26 commercial projects around Shanghai, say that their new venture aims to build on the Chinese firm’s success at refitting and repositioning aging buildings to reach a portfolio of $2 billion of assets under management across China’s first-tier cities within the next three years.
The redevelopment initiative adds to more than $4 billion invested in China real estate projects by Warburg Pincus, including announcing new enterprises focused on structured debt and distressed assets within the last five weeks.
Betting on Redevelopment as Values Rise in Major Cities
“With dwindling new land supply in first-tier cities in China, the revitalization of existing land parcels and buildings within city centers has become an important investment focus of ours,”said Ellen Ng, managing director of Warburg Pincus in the statement.
Ng added that by leveraging Creater’s experience in produce design, conversion and operations, Warburg Pincus sees an opportunity to profit from repositioning well-located but underutilized buildings in China’s major urban centres.
Converting Old Buildings into Creative Offices
Founded in 2006, Creater focuses on converting old and underutilized buildings into shared office, retail and exhibition space covering 330,000 square metres across its 26 projects. Among the projects currently managed by Creater is Creater Space Yu Yuan, a block of 10 renovated heritage villas in a lane community on Yu Yuan Lu in Jing’An district. As the revitalised nearly-century-old lane now hosts Yu Yuan Department Co, a creative space that combines Akimbo Café Lab, retail brand PO Box and a curated art corner by gallery operator Aura.a.
Another Creater project is He at 2710 Wanhangdu Road in Changning district, where the group has the former warehouse serving a disused cotton plant into a modern office space which maintains the industrial building’s original butterfly stairs and mezzanine floors for a touch of Shanghai’s hard-working past.
“Our urban renewal approach is not only to convert and improve the physical attributes of buildings, but also to redefine an uplift the service components in the process,” noted Fang Wen, president of Creater, in the statement.
The urban redeveloper said it provides its 1,000 member companies and communities with a number of value-added services, including office support, investment and financial services, all through a smart IT management and application platform.
Warburg Pincus Adds to China Real Estate Arsenal
New York-based Warburg Pincus has become one of the most active US private equity players in China’s real estate markets with over $4 billion in more than 30 real estate enterprises in the country including offices, retail, logistics, for-rent apartments, business parks, hotels, data centers and parking.
Earlier in December, Warburg Pincus announced that it had formed a $1 billion joint venture with Beijng-based Hande Group for investing in distressed and “special situations” real estate opportunities in mainland China.
In late November Warburg Pincus formed a new partnership with Greg Wells, former Asia head of real estate private equity firm Forum Partners, to focus on structured debt investment opportunities in Asia, primarily in China.
Earlier in November the company announced that it would invest up to $413.5 million into Hong Kong-based residential startup Weave Co-living after launching that partnership with a $181 million bet on the sharing economy startup.