Global insurance giant Allianz is committing an estimated $175 million to a commercial real estate investment fund targetting opportunities in China, managed by Warburg Pincus-backed KaiLong Group.
Allianz announced on Monday that it is taking a 35 percent share in the closed-ended KaiLong Greater China Real Estate Fund II, targeting value-add commercial real estate opportunities in China and Hong Kong. Shanghai-based KaiLong aims to raise a total of $500 million in equity, with the remaining 65 percent held by like-minded institutional investors.
The deal, conducted by Allianz’s own real estate investment unit, forms part of the group’s strategy to allocate around 10 percent of its global real estate portfolio to the Asia Pacific region.
Allianz Looks for Growth Economies in Asia
“We are looking to deploy approximately 50 to 60 percent of our Asia-Pacific allocation to growth economies. Strong secular growth, continued urbanization, the transition to a service-oriented economy and improving transparency are supporting stable real estate occupiers as well as investor demand in China,” noted Rushabh Desai, Asia Pacific CEO of Allianz Real Estate, in a statement.
Shanghai-based Kailong first announced this latest Greater China fund in February of this year, following its full deployment of the $238 million KaiLong Greater China Real Estate Fund, its first US dollar vehicle targetting the territory.
The new Greater China fund continues the investment strategy of its predecessor, with a focus on value-added commercial and industrial office deals, primarily in first-tier mainland cities and Hong Kong, KaiLong’s then newly appointed CEO for Hong Kong, Ivan Ho, told Mingtiandi earlier this year.
Kailong Attracts Bigger Partners
“We view this partnership with Allianz as the first step in a relationship which will focus on creating long-term value for investors and will be supported by KaiLong’s substantial credentials and experience in delivering and managing real estate assets across the Greater China market,” Hei Ming Cheng, chairman and CEO of KaiLong Group, said in the statement.
Founded in 2004, KaiLong held a final close on its first US dollar fund in May 2015. The company has since invested some $270 million, including co-investment capital alongside the fund, in eight deals across Greater China – three each in Hong Kong and Shanghai, and one each in Beijing and Dalian.
Cheng’s private equity investment shop received a heavyweight endorsement in 2016 when US private equity firm Warburg Pincus took a 4o percent stake in the value-add real estate specialist through its majority-owned subsidiary, D&J Industrial Property (China) Investment Co, according to a statement at the time from the three companies.
Allianz Ups China Deal Count
German financial heavyweight Allianz has become increasingly active in China’s real estate market since Rushabh Desai took the top APAC position with the asset manager just over two years ago.
Last month, Allianz partnered with Alpha Asia Macro Trends Fund III, and an unnamed co-investor to acquire an office park property in Shanghai’s Bay Valley Business Park for an equity consideration of $48 million.
That Shanghai deal was preceded by a July acquisition by the German finance firm’s real estate division which purchased a business park asset in Beijing’s Zhongguancun area from Goldman Sachs and KaiLong for a price reported to be between $185 million and $196 million.
Just three month earlier, Allianz real estate had teamed up with a fund managed by Hong Kong’s Gaw Capital Partners to purchase a pair of buildings at Sky Soho in Shanghai’s Changning district for RMB 5.01 billion in April of this year.