CapitaLand holds first close on maiden property debt fund

CapitaLand, a Singapore-listed real estate conglomerate, has garnered $556 million for its first real estate debt fund, the firm announced.

CREDO I China, which has an initial target of $750 million, will invest in mezzanine and other subordinated debt instruments to real estate projects, James Lim, CEO of CapitaLand Investment Management, told PDI.

The fund targets first- and second tier cities, including Beijing, Guangzhou, Hong Kong and Shanghai. It plans to invest in offshore US dollar junior debt instruments during an investment period of three years. The fund has a life of six years.

Lucas Loh, the firm’s president for China and investment management, said a significant volume of China’s commercial real estate loans is due for refinancing within the next few years. Bank regulatory changes and deleveraging measures have tightened the amount of credit available to borrowers, prompting them to turn to non-bank lenders.

The firm declined to comment on the investor roster and target returns.

CapitaLand has been attempting to diversify its geographical exposures since Q4 2018.

Gerald Yong, chief executive of CapitaLand International, the wholly owned subsidiary of CapitaLand for its global investment portfolio, told sister publication PERE in October 2018: “Besides diversification, we want growth and to tap into new businesses and income streams.”

CapitaLand’s real estate investments in its core markets, such as Singapore and China, made up as much as 80 percent of its business in terms of asset value and income, he added.

On the equity side, the group has 15 existing private equity funds, focusing on direct investment in property projects. It also has an existing working relationship with GIC and Temasek Holdings, Singapore’s sovereign wealth bodies.

For instance, Raffles City China Investment Partners III (RCCIP III) is CapitaLand’s $1.5 billion sized core-plus fund. Canada Pension Plan Investment Board is known to be an existing investor, with a commitment of $375 million. CapitaLand’s latest earnings results also showed that it acquired Shanghai’s landmark twin towers through a joint venture between GIC and RCCIP III.

In January, CapitaLand proposed a cash-and-share acquisition of Ascendas-Singbridge, a joint-venture between Temasek and state-owned real estate firm JTC Corporation (formerly known as Jurong Town Corporation). Ascendas and Singbridge are a fund management platform and property developer respectively, owned by Temasek. The sovereign wealth fund currently holds 40.8 percent of CapitaLand’s shares, according to a CapitaLand statement on 14 January.