Colony Capital seeks cross-border opportunities in China

[May 16, 2016]  By Matthew Miller

BEIJING (Reuters) - Colony Capital Inc, the private equity firm founded by U.S. real estate tycoon Thomas Barrack, is scouting cross-border opportunities with Chinese institutional investors, even as growth in the country's wider economy continues to slow.

"It's the right time for Colony Capital to do more in China," said Justin Chang, executive director in charge of the firm's global private equity business.

"Over the next three-to-five years Asia, and China in particular, will be the fastest growing part of our business."

Chang expects 20 percent to 30 percent of Colony's future capital will be deployed in the region.

He joins Barrack in Beijing and Shanghai this week to shore up relationships with institutional partners and meet potential clients.

"It's really a two-way street," said Chang. "We have invested with Chinese partners in the U.S., and we've invested with U.S. partners in China."

Colony Capital, which has about $20 billion assets under management, is turning to China in anticipation of outsized growth in middle class and consumer-driven sectors.

That includes investment in media and entertainment, and financial services, where China's market remains vastly under-served.

Consumption loans in China represented only 24.2 percent of gross domestic product in 2014, compared with 77.5 percent for the U.S., according to iResearch Consulting Group.

Consumption lending is likely to increase 19.5 percent on average from 2014 to 2019, reaching 37.4 trillion yuan ($5.73 trillion), the market research firm estimated.

"We're looking at China as a growth story, particularly in those sectors where growth is faster than the overall economy," said Chang.

Colony Capital made its initial foray into Asia following the regional financial crisis in 1997, investing more than $600 million over seven years.

In 2005, Colony bought Singapore-based Raffles Holding Ltd and the 41 hotels it owned and managed for S$1.72 billion ($1.25 billion).

Colony at the time also targeted Chinese distressed debt, forming a special situations fund with Shanghai Industrial Investment Corp, alongside International Finance Corp [IFK.UL], the private-sector arm of the World Bank.

The company turned away from Asia following the global financial crisis, when it concentrated investment in North America and Europe.

Real estate and hotel properties, which comprise about 70 percent of Colony's holdings, represent a starting point for cooperation, Chang said.

"There are opportunities to partner with Chinese capital, partners who are interested in building, acquiring or investing in hospitality assets in the U.S. and Europe," Chang said. "We also see ourselves in those hospitality and tourism sectors in China."

(Reporting by Matthew Miller)

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