Founded in 1997, the privately-held Xinyuan has become a leading residential developer in Zhengzhou, having built and sold approximately 5,000 middle-income homes to date. The Company has a unique opportunity to expand its business, given China is home to almost 25 second-tier cities with populations greater than 3 million, and will use the new capital to fund this accelerated growth.
"The growth of the middle-class in China has resulted in significant unmet demand for affordable homes," said Gary Garrabrant, Equity International's chief executive officer. "The effective combination of a proven local operator, expertise of Blue Ridge China and our global skill set and experience will represent a strong competitive advantage for Xinyuan in this dynamic sector."
The rapid urbanization of China, increasing income and affordability, availability of consumer credit and strong demand for home ownership has resulted in significant residential growth. Historic undersupply in second-tier cities has not been able to keep pace with growing demand. Significant barriers to entry, such as capital constraints and complexity of land acquisition and entitlement, continue to limit both new competition and adequate supply. Given the highly fragmented homebuilding sector and the strength of Xinyuan's infrastructure, Equity International believes that there is an opportunity to scale the business through replication and consolidation.
Equity International plans to replicate its homebuilding success in Mexico (Homex) (NYSE:HXM) and Brazil (Gafisa) (BZ:GFSA3) in other markets and believes that China represents similar potential and opportunity. Xinyuan likewise anticipates benefiting from this strategic relationship. "We see an immediate opportunity to leverage Equity International's valuable homebuilding expertise gained in Latin America," said Zhang Yong, founder and chief executive officer of Xinyuan. "We are excited to enhance Xinyuan's outstanding operating platform by importing best practices, systems and technology."
"Equity International is highly regarded as a partner and widely recognized as a leading international real estate firm. We expect that their proven success, operating know-how and exceptional access to capital will be a real benefit in this investment and we look forward to the partnership," said Richard Gerson, Blue Ridge China's managing partner.
About Equity International
Equity International is a private equity firm that invests in real estate-related companies outside of the United States. Established in 1999, Equity International is affiliated with Equity Group Investments, LLC, the investment company founded and led by Sam Zell. Equity Group is one of the world's largest owners of real estate through its four affiliated public companies with an aggregate equity market capitalization in excess of $20 billion. Two of the four companies, Equity Office Properties Trust (NYSE:EOP) and Equity Residential Properties Trust (NYSE:EQR) are members of the S&P 500.
About Blue Ridge China
Blue Ridge China Partners, L.P. is a private equity fund focused on China. Blue Ridge China Partners was founded by members of Blue Ridge Capital, a New York-based global investment firm that was established in 1996, and Justin Tang.