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MONTREAL (Reuters) - Ivanhoe Cambridge, the real estate arm of a top Canadian pension fund, said on Monday that it led a $920 million capital raise in Shanghai developer Chongbang Group, as it and others in its consortium look to Asian markets for higher returns.
This is the second institutional capital raising for Chongbang, which was created in 2003 in Hong Kong by Singaporean and Hong Kong investors.
Singapore's sovereign wealth fund, GIC, is an existing shareholder of Chongbang, which has developed seven retail-anchored lifestyle projects in China and is planning future mixed-use developments, the company said in a news release.
Ivanhoe Cambridge, the real estate arm of Canada's second-largest pension fund manager, Caisse de depot et placement du Quebec, said it invested $500 million in the capital raise, which also included participation from APG Asset Management N.V. of the Netherlands.
"It's a strategic investment in a company and we're getting access to a critical mass of assets and access to a development pipeline," said Rita-Rose Gagne, Ivanhoe Cambridge's head of growth markets in an interview with Reuters.
The deal was 18 months in the making for Ivanhoe Cambridge, which entered the Chinese market in 2006, and is now looking to grow in a region where it expects long-term returns in the mid-teens and above, Gagne said.
Canada's eight largest pension funds have become increasingly bullish on higher-yield real estate abroad, with their investments soaring from $5.8 billion in 2004 to $13.5 billion last year, according to a June 16 report by real estate services firm CBRE Ltd.
Yet over the last decade, only one percent of real estate investments by larger Canadian funds targeted Asia, with most of their investments bound for the familiar and less risky U.S. market, the report said.
Gagne said Ivanhoe Cambridge, a veteran developer and operator of shopping centres, targeted a prudent Chinese company with similar expertise.
"The partner's activities are very familiar to us," she said. "When you invest in something you know, that's a big risk-mitigator."
Chongbang CEO Henry Cheng said in the release it would use proceeds from the capital raising to more than double its portfolio of lifestyle-based retail developments over the next few years.
"Chongbang sees enormous growth opportunities in the retail-anchored mixed-use sector in Shanghai and its neighboring cities, both in terms of development of new projects and enhancement of old ones, as the region steps up its urban regeneration programs."
Reporting By Allison Lampert; Editing by Bernard Orr