"We expect to improve rental yield of the property to at least 10 percent per year after renovation. It will be the first of many sizable mainland real estate projects the company will take on in the near future," said Mico Chung, chairman of CSI.

Warburg Pincus, one of the world's largest private equity funds, has invested over $350 million in the sector over the past two years. Its latest acquisition is a 25 percent stake in Shanghai-based RZ Real Estate Development.

"We plan to invest no less than $30 million in the projects of RZ Real Estate Development," said Philip Mintz, managing director of Warburg.

DTZ's Li said foreign funds generally target 20 to 25 percent of the internal rate of return.

"In recent years, they have been setting their sights on second-tier cities such as Chengdu and Tianjin," he said.

According to DTZ, domestic funds are the core land buyers, accounting for 80 percent of land transactions, while foreign funds prefer buildings, accounting for 82 percent of sales.

(China Daily 03/01/2007 page14)

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