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MGPA eyes China real estate despite policy risks
MGPA, an independent private equity (PE) fund specializing in real estate, is planning a comeback to the China market despite measures being implemented by the government to cool down the overheating property segment.
Amy Lam 23 May 2011
MGPA, an independent private equity (PE) fund specializing in real estate, is planning a comeback to the China market despite measures being implemented by the government to cool down the overheating property segment.
 
The fund invested in Shanghai’s Platinum building in 2004 and exited in 2006. Since then, MPGA has not had any investments in China but it keeps offices and operations in the country. “The fact that we don’t have any investment in China does not mean that China is not attractive to us. We are pretty active in China. In the last two years, we were focussing more in Southeast Asia,” according to John Saunders, MGPA chief executive officer for Asia.
 
With USD10 billion in assets under management in Asia and Europe, MGPA is not too far from closing some deals in China and it expects to do two to three projects in second tier cities, Saunders says.
 
Although China’s real estate market is now at the centre of the storm under the government’s effort to prevent a property bubble especially in the residential sector, MPGA, being an opportunity fund, now sees value in China’s commercial property market.
 
“Cyclically there is less competition than before because there are less people with real money to spend,” Saunders adds.
 
MPGA looks to buy underperforming commercial property including malls, offices and hotels. It will then apply fixes to the projects such as renovation, or changing the tenancy base and retail mix, and then sell the project at a higher price.
 
MPGA Asia Fund III, which is managed by Saunders with capital commitment of USD3.9 billion half of which has been deployed, are looking for equity investments in USD200 to USD250 million projects, which can be leveraged up to USD400 to USD450 million.
 
In response to the government’s recent policies, Saunders says: “The goals of Chinese regulators are relatively clear and transparent. Recognize what the regulator is going to achieve and don’t put yourself in harm’s way by going against the flow of government policy. That’s why we haven’t looked to aggressively invest in residential properties because it tends to be a focus of the government.”
 
 
MPGA may invest in projects alone or with a partner, which can be local authorities, local developers, foreign developers and local companies with a piece of land.
 
“Our general partners have general enthusiasm on China with the same concern that we have. Overall there is good appetite on China. But obviously we have to choose the right domestic partner and go through the regulatory environment,” he adds.
 
 

  

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