2010AWARDS & AnnuAL REVIEW - PERE

ASIA INDUSTRY FIGURE OF THE YEAR
ASIA
1. Collin Lau, China Investment
Corporation
2. rong ren, Harvest Capital Partners
3. Goodwin Gaw, Gaw Capital Partners
When China Investment Corporation (CIC)
appointed former Starr International executive
Collin Lau to lead its real estate division
at the turn of 2009, it picked up a real entrepreneur
– flexible on deal type but consistently
able to execute on transactions, which
provide the Beijing-based sovereign wealth
fund with multiple exit options. Central to
his philosophy – and by inference, that of CIC
– is investing in deals that provide for long-term recurring income
and the prospects of reasonable capital gains. The door
is open to just about any type of real estate investment, blindpool
commingled funds included, so long as CIC “is able to
customise it to fit to our requirements” Lau said. “For me, the
option of having good long-term multiples is probably more
important than just capturing short-term IRR.”
As it happens, those familiar with CIC’s real estate division
have told PERE that it already has achieved outsized IRRs in
the 18 months or so that it has invested in real estate, with
some sources putting them in the high double-digits. Remarkably,
deals including the $6.8 billion recapitalization of
General Growth Properties and the forthcoming A$2.5 billion
(€1.8 billion; $2.5 billion) purchase of an Australian industrial
fund from ING Real Estate Investment Management
were transacted by an “amazingly small” CIC team. What is
certain is that CIC under Lau has exceeded expectations.
ASIA
DEAL OF THE YEAR
Lau: delivering
results
Almost as quickly as Bank of America Merrill Lynch (BoA ML)
could place the management of its ill-fated $2.65 billion Asian
Real Estate Opportunities Fund on the market, The Blackstone
Group was tipped as a bidder. On the surface, it immediately
made sense: Blackstone had offices in Hong Kong, Shanghai,
Tokyo and Mumbai but barely 15 staff members to fill them, as
its global real estate efforts were more active elsewhere. Still, the
private equity behemoth was probing for a viable entry into Asia.
However, not long after a marketing process for the fund’s
management started in the spring of 2009, due diligence revealed
potential litigation issues between the fund’s 25-strong group of
LPs and BoA ML over actions considered non-fiduciary. Those
FIRM OF THE YEAR
1. Harvest Capital Partners
2. the Blackstone Group
3. Angelo, Gordon & Co
Luck? Sound judgment? Call it what you will, but Harvest
Capital Partners has had a good 2010.
Starting the year with the announcement that it had corralled
$325 million for its CR China Retail Real Estate Development
Fund, the China Resources-backed firm led by chief
executive officer Rong Ren clearly gained traction from international
investors at a time when others struggled. The final
closing for the fund and its sister effort, an income-producing
assets fund also focused on retail, are yet to be formerly announced,
but PERE understands the firm has managed to attract
$800 million for both – one of the highest equity hauls
by any firm across Asia last year.
One reason for Harvest Capital’s success was that it had
pre-identified its investment pipeline ahead of taking the
funds on the road. The Hong Kong-based firm is to acquire
properties, many of which will be pre-leased, from SZITIC
Commercial Property, a Shenzhen-based development firm
in which China Resources is also an investor.
Regulation also was kind to the 40-person firm. In September,
the Chinese Insurance Regulatory Commission
ruled that China’s $670 billion insurance sector could invest
up to 10 percent of their assets into real estate. The ruling
came with some pretty restricting caveats, including no investments
in residential property or development. As Harvest
Capital has focused its efforts primarily on retail, having sold
most of its residential assets, it is perfectly placed to regard the
insurers as an ideal exit route.
1. The Blackstone Group’s takeover of Bank of America Merrill Lynch’s Asia Real Estate
Principal Investments platform
2. MGPA’s letting to Citibank at Asia square in singapore
3. Fortress investment Group’s acquisition of davinci Holding’s corporate debt
actions involved an ill-timed foreign exchange trade and valuations
adopted by the bank when it seeded the fund with its balance
sheet assets. Consequently, Blackstone dropped out of the
running for the fund even though the proposition had expanded
to include the management of the bank’s other Asian real estate
as well – a total portfolio valued at more than $8 billion.
Ultimately, the sale process faltered as the LPs turned the
screws on BoA ML. The result was a $650 million settlement for
the LPs and the transfer of the general partner and asset management
responsibilities to Blackstone free of charge. In one swoop,
Blackstone achieved critical mass in Asia, the pick of 60 staff and
the management of more than $2.1 billion of fee-earning assets.
2010 AwArds & AnnuAl review | PERE 21