CapitaLand Closes $1.5B China Real Estate Fund With Assist From CPPIB

CapitaLand has reason to celebrate after closing the largest private capital raise effort in its history. The Raffles City China Investment Partners III fund brought in $1.5 billion to invest in mixed-use developments in China’s gateway cities.

The announcement by the Singaporean investment and development giant comes as the Canada Pension Plan Investment Board, the country’s largest pension fund, revealed it had invested $375 million in the investment vehicle to take up a 25 percent stake. CapitaLand subscribed for a 41.7 percent sponsor stake in the fund with major investors from Asia, North America and the Middle East also said to be taking part.

“China is a market with robust long-term investment potential with continued demand for property riding on the back of urbanization, economic growth, the rise of the services sector, a growing middle class, and rising domestic consumption,” Lucas Loh, CEO of CapitaLand China, stated. “These socio-economic themes feature prominently in gateway Chinese cities where the growth trajectory remains robust, heralding opportunities for integrated developments around key transportation hubs.”

The eight-year closed-end fund is CapitaLand’s third such integrated development private investment vehicle aimed at the China market, following the Raffles City China Investment Partners I and II funds. The fund will be managed by the company’s wholly owned CapitaLand Fund Management subsidiary.

“With RCCIP III, CapitaLand now manages 16 real estate private platforms and five real estate investment trusts with assets under management (AUM) worth over S$45 billion,” Capitaland Group chief financial officer Arthur Lang, commented in a statement. “RCCIP III brings us closer towards our goal of raising funds with a total AUM of up to S$10 billion by 2020.”

CapitaLand Continues To Bet On China

While some foreign inventors have been avoiding China due to chatter about housing bubbles and a glut of shopping malls, CapitaLand continues to see opportunity in the market.

The firm, which is part of Singapore’s government-owned Temasek Holdings, manages the US$1.18 billion Raffles City China Fund that is invested in five Raffles City developments located throughout the mainland. Additionally, CapitaLand has pumped another S$1.03 billion ($738 million) into a Raffles City project in Shanghai’s Changning district.

“We look forward to continually build our portfolio of quality integrated developments that delivers robust returns to our investor partners and first-rate value to our customers,” Loh explained.

Another CapitaLand subsidiary made headlines in August when it dove into China’s retail sector purchasing a mall in Chengdu. CapitaLand Retail China Trust handed over RMB 1.5 billion ($226 million) to BlackRock for the fully leased, six-storey Galleria mall in the western Chinese city’s Xinnan Tiandi commercial area.

CPPIB And CapitaLand Share Similar Views On China

The appeal of CapitaLand’s latest China fund for CPPIB may come at least in part from the pension fund manager and the developer sharing similar views on the Chinese market.

“Investing in CapitaLand’s new China investment vehicle gives CPPIB the opportunity to expand on our long-term strategy of investing in high-quality commercial real estate in China to deliver solid risk-adjusted returns over the long term,” Jimmy Phua, Managing Director, Head of Real Estate Investments – Asia, CPPIB, said.

Last week, the Toronto-based limited investment manager paid $147 million for a 49 percent stake in Longfor Properties’ West Paradise Walk, a six-level shopping mall in Chongqing. It was the second joint venture between CPPIB and Longfor with the Canadian pension fund manager having purchased a RMB 1.25 billion ($202 million) stake in Times Paradise Walk in Suzhou during 2014.