Deutsche Bank, H&Q partner for $550m China venture(3)

RREEF and H&Q Asia have launched a joint venture to develop Hilton hotels in China.

Shanghai-based H&Q Asia Pacific and RREEF, the investment arm of Deutsche Bank, have formed a joint venture that will spend $550 million (€408 million) developing and managing a portfolio of more than 25 focused service hotels in mainland Greater China under the Hilton Garden Inn brand.

The joint venture is actively identifying sites with the aim of acquiring at least 15 sites within the first 3 years of operation. The partnership has entered into a preferred development agreement with Hilton Hotels under which the joint venture has certain exclusivity rights to develop Hilton Garden Inn hotels in Shanghai, Beijing, Tianjin and a number of cities in the Yangtze River Delta region for up to five years. 
 
The Hilton Garden Inn brand targets business travellers and weekend leisure travellers. The estimated average Hilton Garden Inn hotel in China would have approximately 200 guest rooms and be would located near airports, business parks and major commercial districts. Hilton Hotels has been operating hotels in China since 1986.
 
International visitor arrivals, excluding arrivals from Hong Kong, Macau and Taiwan, have been growing at a compound average annual growth rate of 16 percent since 2001 and now total over 20 million, according to the China National Tourism Administration. Sixty percent of these are business travellers who typically stay at four and five star hotels near city centres. Domestic visitor arrivals to China have also grown rapidly. Between 2001 and 2006, domestic visitor arrivals grew at a compound average annual growth rate of 11 percent. In 2006 the total number of domestic visitor arrivals reached approximately 1.4 billion people.

RREEF has been steadily expanding into China, announcing last year a $225 million joint venture to build apartments in Zhuhai, next to Macau. This month it launched a listed real estate fund in Hong Kong, RREEF China Commercial Trust. The fund owns a Beijing office complex and is seeking to acquire more commercial buildings in the country.

Founded in 1986, H&Q Asia Pacific firm has managed an aggregate of over $2.1 billion in committed capital through 19 funds since its inception. The firm was originally founded as a division of US investment banking firm Hambrecht & Quist.