Private equity firm looks to build in UK outside of London

Shanghai-based private equity group Prosperous GlobalChina Capital is fast expanding into the UK's property market outside of London, while eyeing future investments in industrial parks in countries along the Belt and Road.

Within two years of its establishment, PGC Capital has already invested in two residential and commercial developments in Birmingham. The first was the development of a property block - Jewel Court - with 77 units; the second was a lifestyle hub consisting of about 500 units in central Birmingham's Digbeth area.

Chief Executive Denise Li says her team decided to make the Birmingham investments after witnessing the city's housing shortage, and the successful development of both projects helped PGC Capital establish a good reputation in the UK and globally.

Investment capital and revenue figures are confidential, so it is not possible to calculate investment returns, but one thing is for sure: Jewel Court allowed PGC Capital to establish a good name for itself, especially as the project was 'Highly Commended' at the International Property Awards 2016 for residential property in the West Midlands.

Li says she feels this investment achieved two objectives. First, it fits her team's philosophy of "altruistic investment".

"We want to help the local market provide the housing accommodation it they badly needs," she says.

Second, it helped PGC Capital establish a name in the British market.

Li says: "We have a philosophy of 'one step at a time' and making investments where we can accurately estimate the risks, so we didn't want to start in competitive markets such as London. Instead, we found a niche market in Birmingham."

PGC Capital's participation in the project was limited to financial investment, leaving the construction work to local specialists.

However, PGC Capital played a crucial role in using its China-based network to attract buyers, and when it launched the project formally in Birmingham, the properties were almost all sold.

Li says: "Many buyers are Chinese and other Asian investors. We have used our advantage as a Chinese company with solid knowledge of the Chinese market and our wide network in China to sell those units to our customers.

Very often these investors purchase units and rent them out to local customers. And finding tenants is easy because of the big demand for houses in Birmingham."

PGC Capital's decision to focus on Birmingham reflects the trend of Chinese investors eying regional investments as they become more familiar with the UK, compared with their initial investments, which were concentrated in London.

One key project demonstrating this trend is the Beijing Construction Engineering Group's investment in the 800 million ($989.5 million; 919.5 million euros) Airport City Manchester project. The group is also involved in construction of the project. In addition, BCEG is investing in two residential and commercial property developments in Manchester, Middlewood Locks and St. Michael's.

Eric Pang, director and head of the China desk at JLL, a leading commercial property and investment management services company, says it is very encouraging to see Chinese investors engaging with the UK's regional property markets, especially in what are known as the Big Six: Manchester, Birmingham, Bristol, Leeds, Newcastle and Edinburgh.

Pang says: "Those cities are less affected by Brexit uncertainties compared with London, because their economic growth relies more on local market fundamentals than on the UK's relationship with Europe."

He adds: "PCG Capital's strategy of matching its capital with Birmingham's local market skills and local housing needs is smart. The Birmingham local market has many skilled workers and professional construction and other supporting firms to competently carry out the construction work, and PCG Capital's finacial contribution creates synergy."

After experiencing success with Jewel Court, PCG Capital has taken a more courageous move, investing in a lifestyle hub in Birmingham, which involves the construction of 500 housing units. The hub is located in Digbeth, in central Birmingham, and construction work is expected to begin later this year. Meanwhile, PCG is also looking to "expand property development with the same principles in Europe".

But PCG Capital's ambition is not limited to the property sector alone. It has an ambition to invest in industrial parks along Belt and Road countries.

The company attracted considerable attention from members of London's investment community in December 2016 when it launched a 600 million fund to invest in such projects. The fund will be created in partnership with London-based McCafferty Asset Management.

Li says: "We hope to invest in industrial park projects because we can see this sector as having tremendous development opportunities due to the China-led Belt and Road Initiative."

Stressing the strategic importance of the 600 million fund, Li says the focus is not just profit, but simultaneously assisting Chinese tech companies to go global and participate in infrastructure investment associated with the Belt and Road Initiative.

Li says: "We hope to contribute to Chinese companies' participation in projects along the Belt and Road, and to co-invest with other Chinese companies. Some of those companies may be operating in the infrastructure and energy sectors, so they could take their tech to the rest of the world, and learn lessons from international markets to take back to the Chinese market."

Although property investment and industrial park projects in the Belt and Road Initiative seem to be different industries, Pang points out that successful property investment in Birmingham helps PCG Capital to establish a name for itself globally, which is particularly important as its 600 million fund is looking to attract external investment and bank financing.

PCG Capital's journey in Europe has only just begun, and perhaps Li is in a unique position to lead the team due to her track record of cross-border business advisory activities.

Born in Taiwan to parents originally from Shandong, a coastal province that is part of the East China region, Li grew up to be patriotic. Her eyes spark with enthusiasm when she speaks about China, alluding to her Chinese name Fuhua, meaning bringing prosperity. Her brother's Chinese name, Fuzhong, carries the same meaning.

Over the years, Li has acted as an adviser for many Western heritage brands that have entered the Chinese market, including Formula 1, the English Premier League, Porsche, New Zealand Zespri Kiwifruit, Nissan, the NHL, Omnicom and Amway.

In line with the Belt and Road Initiative, Li inaugurated the International Finance Summit in China, together with Czech politician and former president of the EU Council Mirek Topolanek. It showcased cutting-edge global investment insights and projects to provide government-related European energy and infrastructure investment opportunities for Chinese institutions and high-net-worth individuals.

In 2016, she was twice invited to appear at the Financial Times Forum in London as a representative of China. She also has a team of international lawyers who provide sophisticated top-structure design and investment banking services for M&A projects.

So, for Li, joining PCG Capital was a natural step in her career. It is a company where she can use her experience to contribute to a cause she believes in.

"It is a pleasure to see Chinese investment is now booming overseas and that we are able to participate in this process," she says.

cecily.liu@mail.chinadailyuk.com

(China Daily European Weekly 03/24/2017 page30)