PACIFIC ALLIANCE CHINA LAND LTD Patrick Boot pboot@pagasia.com (86) 21 6010 6188
Pacific Alliance China Land
Quarterly Newsletter March 2019
Fund Performance
NAV per Share
Total Net Assets
Issued Shares
Share Price
Market Capitalization
Portfolio Breakdown
Cash
Investments 3
Foreign Exchange Hedging Options
Total Cash and Investments
Other Net Assets/(Liabilities)
Fund Details
Bloomberg Code
Reuters Code
ISIN Code
Listing
Date of Inception
Domicile
Structure
As at 31 March 2019
US$2.7482
US$ 7.3m
2,653,0781
US$2.63
US$ 6.8m
US$ 7,766,6892
US$ 11,583
US$ 7,778,272
US$ (487,113)4
PACL LN
PACL.L
KYG6846Y1035
AIM London Stock Exchange 22 November 2007 Cayman Islands Closed-end fund
Investment Objective
Pacific Alliance China Land Limited (PACL) is a closed-end real estate fund focused on investing in existing properties, new developments, distressed projects and real estate companies in Greater China. The Fund invests opportunistically across all types of property, with a focus on first, second and third tier cities. The Fund is advised by a dedicated team of experienced professionals located across China.
On 25 July 2014, PACL's investment policy changed to restrict new investment solely to a) supporting existing investments, b) utilizing RMB cash assets subject to exchange control restrictions, for low risk short-term investments, and c) to focus future investment management efforts on the realization of the portfolio and the return of net realization proceeds to Shareholders. PACL has since July 2014 returned a total of US$262million to shareholders by way of share repurchases.
Portfolio News
The Fund's net asset value (NAV) as of 31 March 2019 was US$7.3 million or US$2.7482 per share, a slight increase of 1.1% from the previous quarter ending 31 December 2018. Following the sale of its assets, PACL no longer has active investments. The remaining cash holdings are in the process of being repatriated for distribution to shareholders, as detailed in the Distribution section of this newsletter.
In line with market expectations, China's Gross Domestic Product (GDP) grew 6.4% year-on-year in the first quarter, remaining flat compared to the last quarter, indicating a steady pace of GDP growth. Robust growth in consumption and the services sector contributed positively to economic performance as tertiary industries grew by 7.0% in Q1 2019. Real estate development investment increased by 11.8% year on year in Q1 2019, slightly higher than Q4 2018. The Chinese economy still faces challenges and downward pressure from excess industrial capacity, as well as rising trade tensions with its largest trading partner, the United States. While the macroeconomic situation is decidedly mixed, China's overall outlook remains stable and it is possible for a positive resolution to the current China-U.S. trade disagreement. The government is likely to continue its monetary policy support and fiscal expansion in order to maintain a moderate and sustainable level of growth.
1.2,653,078 ordinary shares issued and outstanding. In December 2018,
20,833,331 shares were repurchased and cancelled.
2.Approximately US$6.7m equivalent was held in PRC banks in form of RMB cash assets.
3.Following the share capital restructuring in March 2009, 48.69% of the original PACL ordinary shares in issue were repurchased and cancelled. In return, shareholders who tendered their shares received an equivalent number of new shares in PACL II Limited, a Cayman Islands private realization vehicle that would distribute free cash from exited projects (invested prior to the reconstruction) held by PACL. The investments values represent only that amount attributable to the PACL shareholders and exclude any portion that is attributable to PACL II. Those investments marked * were acquired after the restructuring and PACL II does not have a participation.
4.Other Assets/(Liabilities) - Includes Accrued Taxation on realized gains of US$0.4m
According to data from China's National Bureau of Statistics (NBS), prices of new homes increased in 66 of the 70 cities tracked by the NBS in March 2019, compared with 59 in December 2018. Most tier-one and tier-two cities saw limited growth in terms of both price and transaction volumes as a result of the Chinese government's stricter property tightening measures. Average new home prices in first-tier, second- tier, and third-tier cities increased 0.2%, 0.6%, and 0.7% month-on-month, respectively.
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Patrick Boot pboot@pagasia.com | (86) 21 6010 6188 | ||||||||||||
US$ NAV | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD |
Return% | |||||||||||||
2007 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | -0.08% | -0.08% |
2008 | -0.27% | -0.33% | +0.04% | +2.61% | +0.78% | +0.55% | +0.40% | -0.16% | +0.76% | +1.21% | -0.15% | +0.59% | +6.20% |
2009 | +0.29% | +0.06% | +2.61% | +0.05% | +0.12% | +1.15% | +0.50% | +1.14% | +0.82% | -0.20% | -0.21% | +20.79% | +28.60% |
2010 | +0.53% | -0.21% | +1.49% | +0.02% | -0.09% | +1.96% | +1.53% | -0.33% | +11.63% | +0.66% | +0.03% | +8.90% | +28.10% |
2011 | -0.51% | -0.04% | +0.35% | +2.61% | -0.09% | +1.00% | +7.73% | 1.34% | -0.19% | +0.86% | -0.28% | +6.12% | +20.55% |
2012 | -0.26% | -0.12% | +0.75% | -0.16% | -0.45% | +2.61% | -0.17% | -0.28% | +1.00% | +0.12% | +0.77% | +3.10% | +6.97% |
2013 | +0.24% | -0.08% | +0.12% | +1.46% | +0.05% | +0.86% | +2.90% | -0.06% | -0.10% | +0.11% | -0.06% | +3.52% | +9.25% |
2014 | -0.75% | -0.94% | -5.35% | -0.27% | -0.63% | -0.24% | -0.19% | +1.38% | +2.94% | +0.52% | +2.94% | +6.55% | +5.64% |
2015 | -1.18% | -0.62% | -0.88% | +4.10% | -0.12% | -0.65% | -2.05% | -6.11% | -1.06% | +3.91% | -3.41% | -5.40% | -13.13% |
2016 | -5.29% | -3.34% | +8.38% | +1.40% | -1.70% | -2.89% | +3.62% | +2.90% | +3.18% | -0.57% | +11.51% | +8.38% | +26.96% |
2017 | -0.03% | -0.70% | -0.37% | -0.32% | +0.21% | -0.06% | +0.25% | +1.90% | -1.21% | -0.11% | -0.50% | +1.42% | +0.43% |
2018 | +3.06% | -0.99% | -0.48% | -0.93% | -1.31% | -2.19% | -2.92% | -0.40% | -0.85% | -1.32% | -0.19% | +2.90% | -5.64% |
2019 | +2.46% | -0.05% | -1.31% | +1.07% |
Portfolio News (continued)
China's home sales volume, in terms of transacted building floor area, fell by 0.9% year-on-year in Q1 2019. The Manager expects that the central government will continue to adopt differentiated housing policies for different cities, tightening controls in tier-one and tier-two cities where housing inventories are low, and loosening controls in lower-tier cities in order to boost demand and help facilitate a reduction of inventories in those oversupplied markets.
Conclusion
The central government continues to maintain purchase and home loan restrictions on first- and second-tier markets with the expectation of stable housing prices and reasonable transaction volume. The Manager expects the market to remain flat in the next few months.
Any questions regarding the above information can be addressed with the Manager via email or telephone.
Fund Highlights
Distributions
The remaining cash represents the original invested capital held in the Fund's Tianjin WFOE*. A capital reduction is currently underway, so the remaining cash can be repatriated and distributed to shareholders.
The timeline below is the Manager's best estimate of the amount and timing of the final distribution to shareholders. The repatriation process involves many steps and requires government approvals. As always, the Manager will work to speed up the process where possible.
Source of Funds | Estimated | Estimated Timing |
Distribution Amount | ||
Tianjin WFOE original | US$6.7 million * | June 2019 |
invested capital | ||
*The estimated final distribution amount is based on the unaudited 31 March 2019 NAV of US$7.3 million, as reduced by operating and winding up expenses of US$0.6 million.
Foreign Exchange Hedging
On Jan 10, 2019. The Fund bought a new FX option in order to effectively hedge the potential FX risk, the hedging costs were also included in the estimation of the operating expenses in 2019.
.
Portfolio Manager
Patrick Boot
Investment Manager | |
PAG Real Estate | |
Tel: (86) 21 6010 6188 | pboot@pagasia.com |
Nominated Adviser | |
Grant Thornton UK LLP | |
Philip Secrett | |
Tel: (44) 207 385 5100 | philip.j.secrett@uk.gt.com |
Important Information
The information contained in this Quarterly Update has been prepared solely by Pacific Alliance Real Estate Limited ("the Manager"). None of the information contained in this Monthly Update is intended as financial, investment or professional advice and should not be taken as such by any party receiving it or obtaining it through any means. Nothing in this Monthly Update should be construed as an offer to sell or a solicitation of an offer to buy any security or to participate in any trading strategy. Contents are based on sources which the Manager believes to be reliable; however no warranty or representation, express or implied is given as to accuracy and completeness. You should rely on independent confirmation of any information contained herein before relying on that information for any purpose whatsoever. Any forward looking statement included in this Monthly Update is based on the opinions or expectations of the Manager, and actual results could differ materially. Historical performance is not an indicator of future performance and should not be assumed or construed as such. Finally, all the information contained herein including market data and prices are subject to change without notice. The information contained herein is being made available to institutional investors and investment professionals only as defined in the Financial Services and Markets Act 2000.
Pacific Alliance Real Estate Limited is the investment manager of Pacific Alliance China Land Limited. The Manager is not regulated by the Financial Services Authority.
www.pacl-fund.com
Pacific Alliance China Land Limited is part of PAG, one of the region's largest Asia-focused alternative investment
managers with funds under management across Private Equity, Real Estate and Absolute Return strategies. PAG has a presence across Asia with over 330 staff working in the region.
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Disclaimer
Pacific Alliance China Land Ltd. published this content on 29 April 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 29 April 2019 05:12:08 UTC
