Warburg Pincus Targets Shanghai, Beijing Redevelopment Deals with $7.7B Platform

After having set up successful China real estate ventures in the logistics, residential and hotel sectors, US private equity giant Warburg Pincus is targeting redevelopment opportunities in the mainland’s largest cities with an urban renewal platform launched this week.

The New York-based firm announced on Thursday that it has set up Golden Union Assets, an urban renewal platform targeting RMB 50 billion ($7.7 billion) in assets under management in the next three years.

Warburg Pincus, which also co-founded warehouse platform ESR and commercial developer D&J China, is establishing the business with Golden Union Group, a redevelopment specialist focused on mainland China’s megacities. Together the partners have seeded the platform with 19 properties in core locations of Shanghai and Beijing.

“We have been impressed by Golden Union Group’s unique capabilities and strong management team,” said Warburg Pincus managing director Qiqi Zhang. “This investment demonstrates our belief in the tremendous growth opportunity in urban renewal and redevelopment.”

Targeting Shanghai and Beijing

At present, Golden Union Assets has assets under management of RMB 15 billion. The partners aim to pursue further urban renewal projects in Shanghai and Beijing through acquisition, repositioning, management and operation of underutilised assets.

Warburg Pincus didn’t disclose the amount of its investment, saying only that Golden Union Assets is the private equity firm’s largest strategic urban renewal platform in terms of assets under management.

Helmed by chairman Jessica Yu, Shanghai-based Golden Union Group has pursued property development for 25 years and was one of the earliest players to concentrate on the potential for redeveloping underutilised assets in top cities, in a strategy closely aligned with the urban renewal plank of China’s current five-year plan.

“After 30 years of rapid growth, China’s real estate industry is entering a new phase of development, focused on unlocking the value of underutilised assets,” Yu said.

Through cooperation with institutions like Singapore’s GIC, Canada’s BentallGreenOak, Hong Kong-based InfraRed NF and Beijing Capital Land, Golden Union Assets will acquire and convert underutilised assets into serviced apartments, creative offices and mixed-use projects in core locations of Shanghai and Beijing.

The platform’s Shanghai properties include Kempinski The One Suites Hotel Shanghai Downtown, featuring high-end serviced apartments in the core commercial area of Jing’an district; Surpass Space Shankangli, also in Jing’an, a low-density historical building complex repositioned into a high-class creative office park with street retail; and Golden Union Park, an industrial-zoned land redevelopment project in Xuhui district.

In Beijing, the platform highlights Inspace Guanganmen, a small-scale community mall in Xicheng district.

Real-World Track Record

During her recent appearance on MTD TV, Yu illustrated Golden Union’s approach with an anecdote about the acquisition and repositioning of the Shankangli property. For that project, the group bought a former steel factory and converted the premises into a hip retail and entertainment destination.

“At the time (that Golden Union acquired the asset), the area surrounding the property was still a construction site, and not as promising as it looks today,” she said. “But we have always been forward looking and we anticipated the future prospects of the property.”

To better leverage the potential returns from managing value-add projects like Surpass Space Shankangli, Yu’s commercial management unit, Golden Union Commercial, began trading on the A-share market last year.

Golden Union Commercial manages about 70 projects in China with a gross floor area of over 1 million square metres (10.8 million square feet), and the experience has helped Golden Union develop expertise in managing asset-heavy projects, Yu said.

Nova Redux

For his part, Zhang led the 2017 founding of Nova Property Investment, an earlier redevelopment platform launched by Warburg Pincus that focused on repurposing existing properties for use as rental residential units, as well as for other applications. Nova went on in 2018 to establish joint ventures with GIC and InfraRed NF for multi-family projects in China.

Under Zhang’s direction, Warburg Pincus has been a partner in Hong Kong-based Weave Living, which acquired a new asset in the Mid-Levels earlier this year, and in Mofang Apartments, a Shanghai-based rental residential management platform.