Banking

BAML to remain as general partner

By Hu Yuanyuan (China Daily)
Updated: 2010-08-10 09:53

BEIJING - Bank of America-Merrill Lynch (BAML) will retain the general partner and fund manager functions of the $2.65 billion Asian Real Estate Opportunities Fund even after US private equity firm Blackstone Group takes over management control of the fund in September, a source familiar with the matter told China Daily on Monday.

"The deal is likely to be completed in September. BAML, which had invested $800 million of its own money in the Asian Real Estate Opportunities Fund, will remain the general partner," said the source from BAML's real estate investment business on condition of anonymity.

Related readings:  Blackstone group eyes agriculture market  Blackstone in $600m China agricultural deal  Blackstone sets up new private equity fund in Pudong  Blackstone to set up a China subsidiary

According to the source, nothing much will change in China after the management transfer.

"The team will still focus on equity investment in the real estate sector, and look for opportunities with high risks and high returns," the source said.

The $2.65 billion Asia-focused real estate fund was set up in 2007-2008 and its investments were mostly in real estate assets and property companies in Japan, China, South Korea and India.

The fund has so far invested $500 million in China. Its major investments include the pre-IPO equity investment of Evergrande Real Estate Group.

In addition, the team that manages the opportunity fund has also invested $500 million of BAML's capital in China's real estate sector.

"After the deal, the real estate investment team will join Blackstone and continue to manage the BAML assets and at the same time help Blackstone develop its investments in Asia," said the source.

According to Fu Xinghua, a researcher with Zero2IPO, real estate is the most important investment sector for Blackstone in China, followed by pharmaceuticals, agriculture and the financial sector.

In June 2008, Blackstone spent 1.1 billion yuan to acquire a commercial plaza in Shanghai. Industry sources said Blackstone has gained at least 600 million yuan from the deal.

Global investment banks have been transferring management control of their real estate assets in line with the requirements stipulated by the US regulator after the financial crisis.

In another sign of how Wall Street banks were moving away from directly managing real estate assets, US private equity firm Apollo Management in March agreed to buy Citigroup's real estate investment division called Citi Property Investors, according to Reuters reports.