Preqin’s Real Estate Online contains detailed information on almost 17,000 completed private equity real estate (PERE) deals globally since 2012, of which 749 were for assets in the Asia-Pacific (APAC) region, worth a combined $78bn. As shown in the figure below, 2015 was a record year for APAC PERE transactions, with 228 deals completing for an aggregate $23bn. In contrast, the region witnessed a slowdown in 2016, experiencing a 36% and 18% decline in deal flow and aggregate value respectively. However, this is a similar trend to European and North American deal values, which fell by 10% and 7% respectively
Office assets have traditionally been favoured among real estate fund managers globally and, APAC is no exception: office assets are the most prominent in terms of number of completed deals (34%) and aggregate deal value (39%) in the region, followed by mixed use and industrial properties. Notably, the combined value of office transactions ($28bn) in the region is even higher than the combined value of investments in mixed use ($16bn) and industrial ($9.3bn) assets.
Australia (49%), China (16%) and Japan (12%) have been the top three investment destinations for PERE deal value in APAC since 2012. Economic growth in emerging APAC markets has prompted fund managers to commit capital to these real estate markets for yield, which may have impacted GP’S focus on other nations. China has experienced a 145% rise in total transaction value from 2015 to 2016, while Singapore has suffered an 82% dip in aggregate deal value.
In 2016, ARA Asset Management, via ARA Harmony Fund VI, set a new record for an APAC PERE acquisition. The core-plus vehicle purchased Century Link, a mixed-use office and retail property asset located in Shanghai, China, from Cheung Kong Property for a record $2.9bn. ARA Asset Management is one of the most active GPs in APAC, investing $5.8bn in PERE transactions since 2012, with a focus on mixed-use and office space in China, Australia and Hong Kong.
APAC transaction value in 2017 so far ($4.4bn) has surpassed the aggregate amount achieved in 2012 ($3.1bn). Rising asset prices globally have made deal sourcing a challenging process for real estate fund managers, with GPs having to invest more capital per deal. However, this trend is more pronounced in developed regions: average APAC deal size has risen in the past five years from $86mn in 2012 to $170mn in 2016. This suggests that APAC has become a more important region for real estate transactions as fund managers with capital to deploy look to source opportunities in a competitive marketplace.