In June 2018, InfraRed NF Investment Advisers (“InfraRed NF”) attended the annual investor event held by InfraRed Capital Partners. Stuart Jackson, CEO, and Hans Kang, CIO, delivered a presentation which offered insights into the real estate market in Greater China, outlining their experience, capabilities and strong track-record in operating within the region’s highly competitive sector.
The presentation encapsulated the two main opportunities InfraRed NF sees in the market; the first being mezzanine loans in tier two and three cities and the second in value-add transactions in tier one cities.
Attractive prospects for mezzanine financing have emerged amid the cyclicality of the residential market in China and the restricted liquidity resulting from a range of policy measures. Further, a number of developers are facing increased difficulty in securing financing which is in turn, driving demand for mezzanine lending.
Driving value-add opportunities, is increased urbanisation which, when coupled with the demands of infrastructure investment, has meant residential prices have risen. Against this, living spaces are getting smaller, and this creates a context where the conversion of properties is not just economically viable but also encouraged. Greater China is also undergoing major disruption from technology; increasing trends towards e-commerce has led to the decline of retail asset valuations while the Airbnb business model and anti-corruption campaign have negatively impacted hotel assets. This confluence of trends creates compelling opportunities for investors to secure assets at a discount to the replacement cost.
There is a degree of inefficiency in the market created by the prevalence of individual owners of assets and their lack of professional experience, the occurrence of distressed owners and the evidence of owners who have no incentive to turn around their asset and are looking to sell.
Finally, for underperforming and distressed assets, there are clear value arbitrages between different usage; for example, hotels can be acquired at prices approximately 30% of the value of the surrounding residential assets.
The InfraRed Capital Partners investor event followed InfraRed NF’s participation in a number of other leading industry events organised by the China Real Estate and Development Association and the Urban Land Institute China Mainland in June which further showcased InfraRed NF’s expertise in the sector.
For more information on InfraRed Capital Partners, please follow the link below: https://www.ircp.com/
Tulchan Communications | +65 6222 3765 | InfraRedNF@tulchangroup.com
About InfraRed NF
InfraRed NF is a Hong Kong-based joint venture between InfraRed Capital Partners and Vervain. Established in 2007, InfraRed NF is a leading investor in the Greater China real estate market with a proven track record of delivering superior returns through a combination of mezzanine financing and value-add investing.
InfraRed Capital Partners is a leading global investment manager focused on infrastructure and real estate. It operates worldwide from offices in London, Hong Kong, New York, Seoul and Sydney and has launched 17 funds including two listed on the London Stock Exchange. With over 130 professionals, it manages in excess of US$10bn of equity in multiple private and listed funds, primarily for institutional investors across the globe.
Vervain (which includes entities operating under the former name of “Nan Fung China”) is a Hong Kong-based private group of companies established in 2004. Vervain has a diversified real estate business, including property investment, property development, project management, real estate private equity investment as well as other financial and mezzanine financing investment. Vervain’s property portfolio comprises high quality residential, commercial, industrial, serviced apartments and hotel properties in Hong Kong, London, New York, Seoul, Tokyo and Vietnam.