Singapore’s Mapletree Raises US$1.4 bil for China Real Estate Fund

Singapore’s Mapletree Investments added US$1.4 billion to the private equity funds competing for China real estate assets last week when it announced the closing of its Mapletree China Opportunity Fund II.

The Mapletree fund is one of the largest China-centred private equity real estate funds to date, and it joins a crowded field of funds looking for real estate investment opportunities on the Mainland.

According to a story in the Straits Times, the fund was closed within 10 months after its launch in October 2012, and the US$1.4 billion raised exceeded the company’s original target of US$1 billion.

Mapletree China Opportunity Fund II is a follow-on investment vehicle to the company’s US$1.2 billion Mapletree India China Fund (MIC Fund) which was closed in 2008, and has since sold two investments for a profit and made cumulative distributions to investors amounting to nearly 90 per cent of total paid-in capital to the MIC Fund.

Will More Funds Bring Less Return for Investors?

Many observers note, however, that while earlier funds may have earned good returns investing China real estate, the interest that those returns has generated may make duplicating those results more challenging.

In recent months a number of new, large-scale funds have been raised by private equity players, and the pressure on these funds to make acquisitions and to merely show some activity to justify their management fees may lead to higher prices for China real estate assets, which could compress investment yields and decrease the potential for later selling these assets at a profit.

In July this year US private equity giant KKR announced a record US$6 billion Asian investment fund, Asian Fund II, and according to sources in the banking industry, has been actively scouting real estate investments in China.

KKR’s competitor, Blackrock purchased real estate focused regional private equity player MGPA in May of this year, taking over the company’s extensive portfolio of properties in Asia, including China, while adding the firm’s 220 team members in Asia and Europe to BlackRock’s existing team.

Other private equity firms have already been seeking greater access to the China market recently with the Carlyle Group last week announcing a US$400 million joint investment with property manager Townsend and local developer Yupei to develop warehouses.

Also last week, Sam Zell’s Equity International announced an investment partnership with logistics real estate fund the Redwood Group.

Firms are Already Competing for Assets

Last month, Blackstone announced the purchase of Hong Kong-based real estate developer Tysan for US$322 million, at least in part for the company’s existing assets in China and ability to execute deals on the mainland.

During April, Carlyle Group bought a downtown Shanghai commercial building for US$266, and Blackstone bought a 50,000 sqm commercial tower in Shanghai during October last year. According to a statement from the company, BlackRock managed $3.9 trillion of assets globally at the end of March.

How Mapletree Stacks Up in China’s Private Equity Competition

Mapletree Investments is a government-backed real estate developer, which originally focussed on Singapore industrial real estate sector, later branched out into commercial real estate, and in the last several years has rapidly established a reputation as a regional property company. The company’s primary shareholder is Temasek Holdings, an investment firm belonging to the Singapore government.

From an initial asset base of S$3 billion which it held in 2000, Mapletree today owns and manages S$18.7 billion of office, logistics, industrial, residential and retail/lifestyle properties.

Before the launch of this latest fund, Mapletree already was managing three Singapore-listed REITs and three private equity real estate funds holding assets in Singapore, China, Hong Kong, India, Japan, Malaysia, South Korea and Vietnam.