British property firm Grosvenor

British property firm Grosvenor will start marketing a new fund for Chinese retail buildings and residential development in the second half of this year, hoping to muster as much as US$1 billion of spending power.

Nicholas Loup, a managing director at Grosvenor, said he expected the fund to initially raise between US$300 million and US$500 million in equity. Borrowing at a loan-to-value of around 50 per cent would double the fund’s spending power. He expected the fund to close before the end of the year.

Property development in China shows no signs of abating despite the introduction of land and capital gains taxes to curb speculation and new rules to encourage more construction of mass housing rather than luxury apartments for the new super-rich.

Demand is fuelled by fast-rising middle class incomes and an estimated eight million people flocking to cities each year.

China attracted US$9 billion in cross-border real estate investment in 2006, up 69 per cent from a year earlier, and the likes of Citigroup Property Investors, Grosvenor, ING Real Estate and Invesco are ramping up their investments this year.

Last week, fund management firm AETOS Capital said it plans to spend at least US$1.2 billion on Chinese property - buying buildings, entering project joint ventures and taking stakes in developers who want to launch IPOs.

Grosvenor already has three funds in Asia focused on property in Hong Kong and Japan, with around US$1.5 billion of assets under management.

Source: The Business Times, 05 June 2007