RREEF in first PRC property deal

Deutsche BankÆs real-estate arm will develop a residential property project in Zhuhai.
RREEF, the infrastructure and real-estate wing of Deutsche Bank, is to enter mainland ChinaÆs property industry via an investment in a mid-market, mass residential project in Zhuhai to be named æZhongzhu UptownÆ.

Investing alongside Chinese and Macanese co-investors, the residential project comprises of 2,000 apartments built on a 106,000 square metre site. The development will be aimed at Chinese middle-managers with families. The flats are expected to cost between $50,000 and $100,000. Construction is expected to begin this year, with pre-sales early in 2007.

The project is expected to gross $225 million, but the amounts initially invested or the internal rates of return have not been disclosed. The Chinese partners are understood to be chipping in with the land plot and RREEFÆs contribution will go partway to building the apartment blocks, with the remainder sourced from construction finance from local banks.

RREEF is also looking at Beijing, Shanghai, Guangzhou, Shenzhen along with another 12 mainland cities. The Zhuhai project was the first to come to fruition and RREEF made the decision to go ahead in mid-summer. The relevant permits and onshore registrations were concluded within the intervening months. To dovetail with current PRC regulations, the project is characterised by equity investment rather than debt, in order to secure the best tax implications upon exit.

ôIt has been a smooth process,ö says RREEF managing director Kurt Roeloffs, who is based in New York. ôThe authorities in the Zhuhai special economic zone were well prepared for handling foreign investors. WeÆd already taken our time choosing our partners carefully and it's important to do that, so that everyone knows exactly where they stand with each other.ö

Formerly known as DB Property Advisors, Deutsche BankÆs property and infrastructure business re-branded as RREEF in July 2006. In October it won a $100-$200 million global mandate for property investment from the Hong Kong Jockey Club.
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