CapitaLand Ltd, Southeast Asia's largest real estate developer by market capitalization, said yesterday it had set up a US$1 billion private equity fund to invest in prime commercial properties in China.

The Raffles City China Fund was successfully closed at US$1 billion and CapitaLand has subscribed for a 50 percent sponsor stake in the RCCF with the remaining interests being taken up by leading financial institutions and pension funds from Asia, Europe and North America, CapitaLand said in a statement to the Singapore Stock Exchange.

The RCCF has an option of closing in December 2008, which may grow it to as much as US$1.3 billion if investor demand is strong. CapitaLand in that case may reduce its stake in the fund to 45 percent.

The RCCF intends to acquire CapitaLand's effective 55.9-percent stake in the completed Raffles City Shanghai and 100-percent stake of the other three Raffles City projects in Beijing, Chengdu and Hangzhou, due to be completed between 2009 and 2012.

"As China's urbanization gathers pace and its middle class grows in tandem with the improving economy, demand for integrated developments will rise," said Lim Ming Yan, chief executive officer of CapitaLand China Holdings Group. "We will continue to develop unique real estate products to cater to an increasingly sophisticated consumer market and establish new real estate funds for investors who share our confidence in China's growth."

The RCCF is CapitaLand's eighth real estate private equity fund in China. At present, CapitaLand has total assets under management of over 19 billion Singapore dollars (US$13.57 billion) from its five REITs and 15 private funds excluding RCCF.

Entering China early in 1994, the Singapore-based company, which owns more than 70 malls and developed homes in cities such as Shanghai and Beijing, made close to 30 percent of its revenue in China last year, up from 20 percent in 2006, according to Bloomberg News reports.

(Shanghai Daily July 17, 2008)