RP Capital, an independent property fund manager based in Hong Kong is to launch an open-ended China physical property fund despite the prevailing announcements of austerity measures by the Chinese government to curb property speculations.
According to RP Capital, as China is a big country, the property market of each city is different and is in a different property cycle. In addition, the residential property market and commercial property market of each city are also different, and the two markets may behave differently because of different types of property investors involved.
The residential property market is the main controlled target of the Chinese government as it affects the ordinary Chinese citizens, and therefore, for years (not just recently) the Chinese central government and some local governments have announced and implemented different policies trying to avoid the residential property market overheating, in particular in the first tier cities, such as Beijing, Shanghai and Shenzhen.
RP Capital believes that the Chinese government has been trying to manage its property market with the objective of having a sustained, stable and healthy development of China property market, which in fact is good news to long-term property investors, such as the Fund.
The Fund is a Greater China regional fund but will mainly focus on commercial properties, especially retail properties in mainland China for the time being because the GDP of China economy continues to be strong, retail sales figure continues to go up at a double digit rate of growth and the commercial property market continues on an upward trend, etc.
Unlike REITs and traditional property equity funds which are highly correlated to the stock market, the Fund aims to deliver consistent stable returns with low volatility through direct acquisitions of completed commercial properties with quality tenants in the prime locations of major cities in mainland China. The unique advantage of direct property investments is that brick and mortar assets are tangible and solid.
Unlike closed-ended China property funds which may invest into developing projects and provide no liquidity, the Fund has been structured as an open-ended fund with quarterly liquidity. According to RP Capital, cash management is very important. As an open-ended property fund manager, one of the key tasks is the match the liquidity of the underlying investments with the liquidity provided to investors at the fund level.
The Fund has secured the world-class services from Deutsche Bank AG as Administrator, KPMG as Auditor, Walkers as Legal Advisor, with independent property valuation performed by DTZ. RP Capital Limited, the Investment Advisor is a Hong Kong Securities and Futures Commission licensed financial corporation engaged in asset management and advising on securities businesses.
Since July 2006, all foreign investors (including citizens and corporations of Hong Kong, Macau and Taiwan) investing into commercial properties in mainland China are required to set up an onshore company with specific required license and permits. The procedures of setting up an onshore company successfully are complicated and not easy, not to mention about the ongoing maintenance work. It must strictly comply with the China taxation, foreign exchange and accounting policies, etc. which change over times. To be successfully investing in China, professional and up-to-date local knowledge is extremely important and necessary.
The Fund is therefore targeting foreign investors who would like to diversify their investments into China and participate into the China's commercial property market but do not have adequate local expertise nor time and energy to go through the complicated and time-consuming investment process in mainland China.
Source: RP Capital