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Partners Group buys Chinese RE fund stakes

Partners Group bought $120m worth of original commitments in Venator’s Trophy Property Development.

Partners Group has bought a portfolio of 31 limited partner interests in Trophy Property Development Fund, a Chinese real estate fund managed by Venator Real Estate Capital Partners, according to a statement from Venator.

The 31 stakes represent $120 million worth of original commitments. Partners acquired the portfolio after several rounds of bidding in an auction organised by brokerage firm Tullet Prebon, according to the statement. The transaction makes Partners Group the second largest LP in the fund.

The auction process took about two months and additional sales are possible if other LPs require liquidity, Venator president Philip Mintz told Secondaries Investor.

“One of the reasons we ran the auction was that we had a fair amount of smallish LPs who never could have gotten liquidity for their positions, which ranged from $500,000 to $2 million. It would have been impossible. We don’t have many of those anymore,” Mintz said.

Other LPs in the fund included TIAA-CREF and the Michigan Department of Treasury, according to PEI’s Research and Analytics division.

Some of the LPs who had sold their stakes were not active or involved in the fund, which made the information flow challenging, Mintz added. Partners’ purchase will help make managing the fund easier, he said.

Trophy Property Development Fund was formed as a joint venture between Hong Kong-based alternative investment firm Winnington Capital and the Hong Kong property developer Shui Onon. The fund closed on $1 billion in 2008, according to Secondaries Investor’s sister publication PERE.

The fund made five minority investments in real estate developments in China.  After delays and increasing costs however, the fund managers appointed a group of advisors to the fund, including private equity real estate business TAN-EU Capital. Venator, which was formed as a spin-out from Winnington in late 2012, began managing the fund. Subsequently, the five minority stakes were traded for a majority stake in one residential development in Shanghai. The change in the composition of portfolio interests is expected to be completed later this year, according to Venator’s website.

Construction on the Shanghai development began a few months ago and Partners did an “extraordinary” amount of due diligence before purchasing the stake, Mintz said.

Last year, Secondaries Investor learned Partners had raised approximately $800 million for two new global real estate funds: Partners Group Global Real Estate 2013 and Partners Group Real Estate Secondary 2013. The firm had been aiming to raise $1 billion each for the funds. It’s unclear if either fund deployed capital for the transaction and the firm declined to comment.