Warburg Pincus targets China distressed real estate

The goal is to bring total assets under management to $5 billion within five years, creating a clear market leader. The platform will pursue non-performing loan-to-own and rescue financing strategies, among others. It has already invested in seed assets in Shanghai and Zhejiang and Hainan provinces.

Warburg Pincus declined to comment when asked where its share of the initial $600 million would come from. The GP is relatively unusual among global firms in investing in private equity and real estate assets out of the same pools of capital. Its latest global growth fund closed at $14.8 billion in 2018 with a $4.25 billion China and Southeast Asia companion fund following a year later.

Wensheng is a credit asset manager focused on special situations investing, corporate restructuring, and purchasing distressed bonds. It had RMB95.5 billion ($14.8 billion) in assets under management as of 2020. The firm launched a distressed property restructuring business in 2017 and established a dedicated team for the strategy a year later.

Real estate is a longstanding target for distressed asset investors in China, either through acquisitions of portfolios from struggling developers or as the collateral that underpins most non-performing loans (NPLs).

The opportunity set has arguably grown as regulators have reduced access to funding and introduced other policy curbs to try and curb price growth. Top-tier cities and premium segments remain a concern, with prices rising 10% year-on-year in the second half of 2020 in Beijing, Shanghai, Shenzhen, and Guangzhou as China rebounded from COVID-19. At the same time, regulators have warned of a potential spike in non-performing assets as pandemic relief measures are rolled back.

“In light of the ongoing financial reform in China and the continued regulatory development, the real estate special situations sector is entering an accelerated growth trajectory,” said Qiqi Zhang, a managing director at Warburg Pincus, in a statement.

The private equity firm has invested more than $6 billion in real estate in Asia since 2005, primarily targeting new infrastructure verticals such as logistics, technology parks, data centers, and smart parking. Two-thirds of current real estate exposure is in new economy real estate and infrastructure.

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• Topics
• Greater China
• Real estate
• Restructuring
• Restructuring
• Credit/Special Situations
• China
• Real estate
• Warburg Pincus Asia