Country Garden raises $442m for distressed RE – exclusive

The investment arm of the Chinese developer is eyeing residential real estate debt opportunities in the country.

Country Garden Asset Management Company, the investment arm of Chinese real estate developer Country Garden, has raised RMB3 billion ($442 million; €403 million) for a distressed fund.

The onshore fund has a target amount of RMB6 billion and is anchored by Country Garden. Commitments made so far are in the process of documentation; this is within two months of the fund being launched in September. The firm will seek to raise the remaining RMB3 billion when it sees more investment opportunities becoming available.

Currently, the manager is looking at over 100 projects in the pipeline and has identified at least seven projects to take forward.

Country Garden listed on the Hong Kong Stock Exchange in 2007 and has operations in over 300 cities in China. It posted over RMB140 billion in sales and RMB14.9 billion in tax payments in 2015.

With an estimated RMB5 trillion of non-performing loans in the Chinese banking industry, there is a growing number of domestic funds competing in the sector. Recently, DCL Investments, a spin-out from distressed investor Shoreline Capital, raised RMB3.7 billion for its debut fund.

Despite NPL sales being the fastest way to relieve the pressure on the banking system, the banks are wary of incurring big losses upon the sales.

Currently, the banks are only allowed to bulk-sell NPLs to the four big asset management companies (AMCs), but unlike in the previous wave of distressed sales, the AMCs want to maximise profits and buy the NPLs on a commercial basis. Therefore, it is often difficult to reach agreement on the pricing for any transaction, according to a PWC report.