Global Asia Real Estate Fund Concludes Its 4th Investment worth USD 44 million
• Dash: China and India is a promising region
• Patnaik: Both investments are situated in an economic development location with excellent opportunities to invest in
Global Investment House “Global” announced today its latest investment in the People’s Republic of China , as part of its Asia Real Estate Fund investment strategy, making it the fourth investment in its portfolio of assets.
Previously, Global Asia Real Estate Fund had announced the successful closure of three investments, two in China and one in India.
The investment opportunity for the Fund is to participate in the development of a mixed use project consisting of office and retail space in Liuzhou, PRC. Constructions and renovations on the project is expected to be completed by Q4 2009. The gross IRR from the investment is expected to be more than 25% p.a.
The subject property has good location within Liuzhou City area where it has convenient access to the current CBD in Chengzhong District. Liuzhou enjoys a strategic location in the region’s overall economic development framework as an industrial and transportation hub.
Mr. Shailesh Dash, Chairman, Senior Vice President, Head of Alternative Investment Group, at Global said, “this investment will provide the fund, an excellent opportunity to invest in the development of a mixed use project consisting of commercial and retail space in Yufeng District, Liuzhou City, Guangxi province, China.”
He added that our partner, Mr Zeng Fu Zu ,Chairman of Unionmet (Singapore) Limited, a listed entity in the Singapore Stock Exchange has a very significant local presence in the subject province which combined their strong relationship with local governmental agencies were key to securing the transaction”.
Mr. Dash explained "A significant amount of work had been completed by the development partner including the successful outcome of the public auction for the distressed asset held in January 2008 which allowed us to make a decision in a relatively short time period”.
Liuzhou has one of the leading economies in Guangxi Province in Western China. In 2007, the city’s GDP accounted for 12.6% of Guangxi’s GDP, with industrial gross output accounting for one-fourth of Guangxi Province’s total industrial gross output. From 2003 to 2007, both GDP and GDP per capita grew rapidly, at a CAGR of above 20% pa. In 2007, Liuzhou was ranked 10th in terms of total GDP and 12th in terms of its GDP growth rate in the Western China region.
Overall the supply and demand in Liuzhou’s real estate market is fairly balanced in terms of total Gross Fixed Area (GFA) completed and total GFA sold over the last 3 years. Compared to some other cities in China which have experienced painful real estate market adjustments after implementation of credit tightening measures in 2006-7, the real estate market condition in Liuzhou is relatively stable.
Overall the supply of office space has been at a relatively low level where prime office buildings are very rare in Liuzhou. Dual purpose buildings, either retail-cum-residential or retail-cum-office, are more commonly found in the city. Single purpose office buildings are mostly built by the government for their own use. Due to limited land supply in the current CDB of Chengzhong District, there is no foreseeable supply within the next 2-3 years. The subject project is the only identified future supply of office space in Yufeng District.
On the other side, Mr. Rakesh Patnaik, Head of the Real Estate Investment Group at Global pointed that the total estimated project cost is approximately USD 44 Million in which, the fund is contributing USD 20Million. In which the fund aims to have a strategic interest in the project.
Having concluded this investment, The Global Asia Real Estate Fund is 85% invested in addition to the process of conducting due diligence on a subject transaction situated in Vietnam, which upon conclusion will enable the fund to achieve its target of 100% investment, Patnaik added.
Mr. Dash ended by saying that the Fund was offered to investors in 2006 with an aim on real estate investment strategy, predominantly in second tier cities in China and India. Global expects the fund to be fully invested in the next few months.
