Asia Pacific Investors in Offshore Private Real Estate Funds

by Ee Fai Kam

  • 14 Mar 2012
  • RE

Asia has traditionally been seen as an investment destination where opportunities for growth and development abound, and investors from as far as Finland and Sweden have invested in the Asia Pacific region. However, as Asian investors mature and grow in sophistication, they are looking beyond the Asia Pacific region for investment opportunities. Preqin’s Real Estate Online database includes 74 institutions located in Asia and Australasia which are interested in private property funds investing outside of the Asia Pacific region. These investors are looking to locations ranging from developed economies such as Europe and the US, to emerging regions such as South America, Middle East, Africa and Caribbean. Collectively, these 74 investors manage more than USD 2.9 trillion in total assets, of which 4.3% is allocated to real estate investments such as private funds, listed vehicles and directly-owned assets. In terms of private investments, these Asia Pacific investors have an allocation exceeding USD 13 billion to unlisted real estate funds such as core, core-plus, value added, opportunistic, distressed and debt vehicles.

At 55.4%, Australian institutions make up the majority of Asia Pacific investors in private property funds operating overseas, while 14.9% is based in South Korea and 10.8% in Japan. The rest of the investors are based in China, Hong Kong, India, Malaysia, New Zealand, Singapore and Thailand.

USD 22.7 billion Retail Employees Superannuation Trust (REST) is an Australian investor which invests in real estate located outside of the Asia Pacific region. It gains exposure to the real estate asset class via direct investments and private property funds. As an Australian superannuation scheme, the majority of its unlisted fund commitments are focused on the domestic market. However, it is open to offshore funds investing in UK and the US. As of mid-2011, REST was actively sourcing of new investment opportunities in the real estate asset class, with a predominant focus on core funds and side allocations to value added and opportunistic vehicles. When making direct investments, the superannuation scheme generally prefers Australian retail assets. REST’s property investments take up 9.1% of its portfolio, which is targeted to reach 13% in the long term. Of its real estate exposure, 78% consists of private funds while the remaining 22% is invested in direct property.

Mitsui Sumitomo Insurance Company is a Japanese insurer which could potentially make its maiden foray in private real estate funds this year. Currently, it is considering suitable opportunities in most fund types, including core, core-plus, value added, debt, fund of funds and secondary funds. Mitsui Sumitomo is open to investing in developed economies such as Japan, Europe and the US, and could begin investing as early as H2 2012. Depending on when its portfolio matures, it could include emerging markets within its scope of consideration. The insurance company will favour vehicles that are not highly leveraged, and could commit a total of USD 50 million to real estate and infrastructure funds. USD 70 billion Mitsui Sumitomo Insurance Company is not placing direct investments and listed funds under consideration.

Another investor which has ventured out of the Asia Pacific region is Korean Teachers’ Credit Union (KTCU). The pension fund’s real estate portfolio is predominantly focused on Korean properties, however it is open to investing in overseas regions such as North America, Europe, the Nordic region, Israel and Africa. Currently, its non-Korean investments include mixed-use and residential properties in Cambodia and office towers in Malaysia. KTCU is an active investor in real estate, and gains exposure through private funds and direct assets. It has no preference for a specific fund type and will consider strategies ranging from core to value added to distressed vehicles. The USD 16.6 billion pension fund will also consider a wide variety of assets such as residential apartments, cargo terminals, offices and commercial buildings. KTCU has an allocation of 20% to tangible assets, and has not set a target allocation to the property asset class.

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