Real estate investment globally has faced a challenging year in 2023, at the same time that mainland China has seen encouraging signs from recent government moves to support the property sector and the rapid expansion of investment opportunities like the country’s pilot REIT regime.
To better understand how investors can best find attractive returns in China’s real estate sector, we spoke with Leo Chen, chief investment officer of ACR, a four-year-old joint venture investment management platform established by former Cushman & Wakefield Greater China CEO Edward Cheung and fund management giant GLP, to learn more about what the market has to offer.
What kind of real estate investment and asset management company is ACR?
ACR was founded in 2019 to establish a professional real estate investment and asset management company in China to provide investors with access to value-add and opportunistic strategies in Asia’s largest economy.
The firm specialises in acquiring and repositioning undervalued real estate projects which can provide effective business locations for occupiers and rewarding exits for investors.
While ACR acquires and sells properties, with our team of property industry professionals, we also operate in an asset-light model, with managing asset portfolios on behalf of investors among our core strengths.
What are some of the challenges and opportunities facing property investment funds in China now?
In the current global economic climate, where China is cutting interest rates and boosting liquidity as the US and other major nations hike rates, the Chinese office market is poised for a recovery in demand and occupancy.
These conditions support the establishment of RMB funds to acquire and reposition Chinese real estate assets for long-term investment. For companies able to identify and acquire suitable assets this presents an attractive window to acquire properties which can provide stable returns at above market rates.
As the market recovers, the advantages of China’s new economy real estate – sectors which benefit from exposure to fast-growing sectors such as technology, biomedical and e-commerce, as well as rental housing, are also becoming more apparent, which plays to ACR’s strengths in business park and R&D assets.
How does ACR ensure attractive investment returns in the current business environment?
While economic growth across the broader economy is not as fast as it once was, expansion in the most promising sectors in China’s major urban hubs is still among the best investment opportunities globally.
Geographically, ACR focuses on the communities with the strongest economies and highest degree of national strategic support, including Beijing, the Yangtze River Delta, and the Greater Bay Area spanning Guangdong, Hong Kong and Macao.
By investing in industrial parks located in national-level science and technology innovation zones, we enjoy the dividends of rapid regional development and active tenant migration, build benchmark projects with high-quality asset management, and ultimately achieve rapid growth in rental income and asset values.
What are some examples of your company’s successful strategies?
Funds managed by ACR have already acquired assets in both Shanghai’s Zhangjiang High Tech Park and Beijing’s Zhongguancun Software Park, giving it a piece of the nation’s two leading innovation hubs. With China’s tech sector continuing to be leading source of growth, our company looks forward to finding more opportunities in these cutting edge centres while building on its knowledge to find and exploit opportunities in other emerging growth centres.
In these locations ACR seeks to identify high-quality assets with rapid growth potential, with each projecting serving a distinct industrial need, such as the Diamond Tower in Beijing, a low-density garden-style R&D industrial park focused on the TMT industry.
Located in Beijing Zhongguancun Software Park, Diamond Tower serves the Chinese capital’s IT community by providing an all-inclusive “an industrial eco-community” which is home to some of the world’s best known technology firms. The asset’s location in Zhongguancun puts tenants in the same district which houses headquarters and R&D centres for hundreds of well-known IT enterprises, including Didi Chuxing, Kuaishou, ByteDance, Baidu, and IBM.
In Shanghai ACR’s Pujiang Yunchuang project has already attracted a major listed healthcare company as a tenant. Our company has plans to attract more occupiers from the healthcare, electronic information, Internet, and other industries to the Minhang district project, while our Shanghai Zhangjiang project combines business, industry, and exhibition.
How is ACR’s team able to boost returns for the projects it acquires?
Achieving investment returns means understanding the potential value of assets and delivering this value to tenants efficiently.
Through strategic asset enhancement initiatives, we can improve the sustainability of properties to bring them into line with the ESG requirements of international occupiers, while also adding wellness elements and other staff-friendly features which ensure that our occupiers have an edge in the race for talent.
We also see community as integral to our mission and seek to create groups of tenants which complement each other and allow occupiers to collaborate and find synergies within the property and the district.
This approach, and the systems that we use to implement it, remain constant whether the project is a simple repositioning or a full-scale transformation. To ensure world-class portfolio management, ACR has developed a dedicated asset-light operations team named “YESS” which specialises in making sure that the new economy projects meet the demands of occupiers and deliver maximum returns for investors.
As ACR’s newest real estate service platform, YESS provides comprehensive asset management services for portfolio properties under the firm’s proprietary operation model, including planning and positioning, renovation and enhancement, and Investment operation management.
Beyond ensuring efficient management of its portfolio properties, ACR is also enhancing returns for our investors by branching out into new asset classes, with our company currently developing a multi-family strategy which will acquire and manage rental residential assets in communities which are seeing an influx of white-collar professionals.
Some of China’s property developers are still struggling to recover after the pandemic, how is ACR different from other real estate investment ventures?
As a fund investor focused on China’s new economy sectors, ACR works with developers, finance firms and official bodies to direct capital where it is most useful and creates the greatest returns.
With China’s capital markets developing, this means creating single asset funds, pooled funds, and debt funds to acquire assets, with ACR also practiced in real estate mergers and acquisitions.
Once assets are acquired, ACR is able to leverage its asset management resources to maximise returns and with China’s pilot REIT regime expanding, our company is already supporting listed real estate investment trust to ensure the stability of asset values and help investors to attain profitable exits.
What is ACR working on as China’s economy is set to rebound in the second of half of 2023 and into 2024?
Our company is constantly expanding its portfolio while also ensuring that our existing projects offer state of the art communities for China’s new economy.
In addition to the Diamond Tower in Beijing and the two Shanghai projects I mentioned in Pujiang and Zhangjiang, ACR also has a third Shanghai complex – a business parks focused on R&D for high tech industries in northern Jing’An district.
Like ACR’s Pujiang project, the Jing’An project is currently under development with leasing already underway, with both properties targeting clients in the biomedical, TMT and other high tech sectors.
ACR is also developing additional projects, including a business park catering to back office operations and business process outsourcing requirements in Pudong’s Zhangjiang Science City.
Situated at the entrance of the Zhangjiang tech cluster, the facility provides a commercial hub in an area which has become a top destination for Shanghai’s white collar workforce.
With these projects in line with the fastest growing industries in China, we are eager to acquire more assets and see attractive opportunities for further acquisitions this year. We welcome the opportunity to speak with like-minded investors which are interested in working with us on these strategies.