CapitaLand launches China discretionary debt fund after raising US$556 million

Top of the CapitaLand building in Singapore’s central business district (CBD); taken September 2018.Top of the CapitaLand building in Singapore’s central business district (CBD); taken September 2018.

CapitaLand said on Wednesday it launched CREDO I China, its first discretionary real estate debt fund, after raising US$556 million, or around S$749.08 million, to invest in offshore U.S. dollar-denominated subordinated instruments for real estate in China’s first and second tier cities.

It was targeting a capital raising of US$750 million, or around S$ 1 billion, and it expects subsequent commitments from major institutional investors later this year, CapitaLand said in a filing to SGX before the market open on Wednesday.

The real estate company will hold a 10 percent stake in the fund, which is expected to be one of China’s largest real estate debt funds, it added.

Lee Chee Koon, CapitaLand’s president and group CEO, said the company was pleased by the strong investor participation in the fund.

“Fund management business is an integral part of CapitaLand’s strategy,” Lee said in the statement. “CREDO I China will broaden CapitaLand’s fund offerings to real estate debts, going beyond our existing 15 private equity funds, which focus primarily on direct investment in property projects.”

Lucas Loh, CapitaLand’s president for China and investment management, said the fund’s timing was “opportune,” with a “significant volume” of China’s commercial real estate loans due to be refinanced over the next several years, even as regulatory changes for banks and credit tightening measures on the mainland have made it necessary to turn to non-bank lenders.

CapitaLand cited Bloomberg data showing around US$70 billion of China commercial real estate loans were due to expire and would likely require refinancing within the next five years, as of end-December.

“We will tap on CapitaLand’s operating capabilities and network in China to source for investment in quality property debt instruments for this debt fund,” Loh said in the statement.

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