BEIJING – Warburg Pincus, the world’s largest private equity firm, has established a China distressed real estate joint venture, one of its largest investments in the industry to date, the company announced on Monday. Warburg Pincus and Wensheng Asset Management, a Shanghai-based distressed asset manager, will invest up to US$600 million in the joint venture, Wensheng Special Situations Asset Management Co, with the goal of growing its assets under management to US$5 billion over the next five years, according to a statement from Warburg Pincus.
The joint venture’s ownership structure was not disclosed by the companies.
According to Warburg Pincus, Wensheng has applied for a local asset management business license that will cover the joint venture, which it expects to get by the end of the year.
The new endeavor comes as China eases access to its bad debt market for international investors, and as a regulatory push to eliminate financial bubbles in the property sector has generated chances for distressed debt investors.
For years, international distressed debt specialists such as BlackRock Group Inc, Brookfield Asset Management, and CarVal Investors have been active in China’s non-performing asset market, primarily the distressed real estate sector.
The new joint venture, according to Warburg Pincus, would focus on acquiring single real estate projects, beginning with “seed assets” in Shanghai, Zhejiang Province in eastern China, and Hainan Province in southern China.
“The real estate special situations market is on an accelerated growth trajectory in light of China’s ongoing financial reform and continued regulatory development,” Warburg Pincus managing director Qiqi Zhang said in a statement.
Warburg Pincus is a private equity business based in Asia that invests in real estate. According to a corporate statement, it manages more than US$22 billion in assets throughout Southeast Asia and China. (One US dollar equals 6.4588 Chinese yuan renminbi) (Cheng Leng and Andrew Galbraith contributed reporting; David Evans edited the piece.) )/n
