APG Invests $400M in CBC China Life Science Real Estate Venture

APG Asset Management has teamed up with Singapore healthcare investment firm CBC Group in a $1.5 billion venture targeting the Asia Pacific life science real estate segment, according to a joint announcement this week.

The cooperation between the Dutch pension fund manager and the Singaporean private equity firm involves both establishing a new investment vehicle, China Life Science Infrastructure Venture (CLSIV) to manage the investments, as well as an operating platform,  CBC Healthcare Infrastructure Platform (CBC HIP), to develop and manage new healthcare projects across the region, starting with one million square metres (10.8 million square feet) of facilities in Shanghai.

In a recently completed first closing, APG has committed $400 million to the fund and CBC has contributed another $100 million, with the Dutch firm taking an 80 percent stake in the venture, while and its Singaporean partner a 20 percent share in their bet on the growth of health and life sciences in the region.

“We are the first mover in the market, we want to provide the best in class facilities to empower their main business [and] be more efficient,” CBC HIP chief executive officer Hans Kang told Mingtiandi. “We want to provide an integrated one-stop solution to all kinds of facility requirements on these life science companies, so that they can focus on their R&D activities and main businesses, while we help them on this infrastructure side.”

Starting in Shanghai

APG and CBC are launching CBC HIP with an initial focus on developing healthcare infrastructure across nine mainland China cities, with the platform having already identified further opportunities in Beijing, in addition to the one million square metre pipeline secured in Shanghai.

The partners aim to expand into Guangzhou and Shenzhen as well as the key second-level cities of Suzhou, Hangzhou, Nanjing, Wuhan and Chengdu, with target projects for the new platform to develop include life science-focused research and manufacturing facilities, hospitals, medical centres and senior living accommodation across the region.

Beyond the mainland, the two companies aim to expand the business into other markets where CBC has already established presences, including Japan, Korea and Singapore within the next two to three years, Kang said, with the potential for later growth into Indonesia.

Kang pointed out the “compelling” risk-adjusted returns available in the mainland’s life science real estate sector, noting that the nation’s healthcare spending will likely double to RMB 13 trillion ($2 billion) by 2026.

Capital for China Launch

With the initial phase of the venture now launched, CBC and APG are ready to take on additional partners for their China Life Science Infrastructure Venture on their way to their $1.5 billion equity fund raising goal.

“We do have a few large institutional investors [and] they are looking at our first vehicle,” Kang said. “We’re trying to raise additional $1 billion from this type of investment so we still have room for new investors,” he added.

Kang said in the interview that APG, which is a new partner for CBC, has already expressed its willingness to increase its investment to the joint venture depending on the success of the first phase.

Aiming for a 20 percent gross return before management fees, the fund will invest in facilities for life science research, manufacturing and support services catering to biotechnology startup incubators in China. Kang said the vehicle has eight years of fund life with the option to extend for two more years.

Kang, who is based in Shanghai, joined CBC one year ago from Hong Kong-based real estate private equity firm InfraRed NF, where he had served as chief investment officer for four years. CBC was founded seven years ago and focuses on building platforms and buyout opportunities across the Asia Pacific healthcare sector with the company having already established $4.6 billion in assets under management.

APG Gets Healthy

The joint venture with CBC marks the first venture into Asia’s life science real estate sector for APG, which manages $698 billion in pension assets globally, as it takes notice of the rising significance of the healthcare sector amid aging population and changing environment.

“As a long-term responsible investor on behalf of our pension fund clients, our intent is always to invest alongside the most capable and knowledgeable operating partners in key sectors for our strategy,” Graeme Torre, APG’s real estate head for APAC, said. “We are delighted therefore to partner with a market-leading organization like CBC to establish the CBC HIP platform and to make the seed investment in its first life science real estate venture.”

BofA Securities and Baker McKenzie advised APG on the deal.

Prior to this latest venture, the Dutch pension fund manager has venturing into a variety of higher yielding sector this year, including setting up a residential joint venture with Hong Kong’s Wang On Group earlier this month.

In August, APG was named as one of the primary backers of a $4 billion China development fund set up by warehouse giant ESR, and in April the firm took a 20 percent stake in Hong Kong-based data centre operator OneAsia.