COAMC preps $1 billion distressed fund

The Chinese state-owned bank plans to attract foreign investors in a bid to improve access to a hitherto relatively impenetrable sector. 

A joint venture fund targeting $1 billion in distressed Chinese real estate assets is to be launched by China Orient Asset Management Corp (COAMC), an arm of one of China’s four bad banks.

The fund will aim to attract foreign investment, its chief executive Lijian Chen told Reuters.

China Orient Summit Capital will invest in distressed property loans and real-estate assets, coinciding with a slowdown in the domestic housing market.  Excess supply and high prices in cities such as Wenzhou and Ordos are contributing to stress in the sector, said Chen. However, he said talk of a property bubble was misguided as the country is too big. 

The fund is 80 percent owned by China Orient Asset Management (International) Holding Limited (COAMCI), a wholly-owned subsidiary of COAMC. The remaining 20 percent is owned by Beijing Wutong Summit Investment Managing Center.

China Orient Summit Capital will reportedly target institutional investors and pension funds in the United States, the UK and the Middle East. Regulatory approval has been sought for the fund, which was launched in February. 

Direct foreign investment in Chinese property is controlled by the government with the aim of limiting excessive speculation in the country, and has been a difficult sector for foreign invesotrs to access as a result.

An attempt to attract foreign investors in the early 2000s failed to take off because of a perceived lack of transparency, among other obstacles. 

Great Eagle Group, a Hong Kong headquartered property and hotel company, has committed to invest $100 million to the distressed fund, according to a statement released by the firm last week. The fund targets financing real estate companies operating in China, Great Eagle said.

KS Lo, chairman and managing director of Great Eagle Holdings Limited said: “Leveraging on the extensive and unrivalled expertise of our highly regarded partner, whose funds have all done well over the past, Great Eagle will also be investing $100 million in the investment fund spearheaded by COAMCI.”

The release announced the establishment of a US office property fund in the US with COAMCI, also targeting $1 billion in fundraising. Great Eagle will own 80 percent of the management vehicle, with COAMCI owning the remaining 20 percent. Great Eagle will inject three of its US office properties into the fund while COAMCI will contribute $150 million and the Hong Kong firm estimates that its capital commitment will be approximately $230 million.