Investment Opportunities in Asia-Pacific-Focused Private Real Estate Funds – October 2013

by Joyce Chee

  • 23 Oct 2013
  • RE

There are 67 private real estate funds in market that have an interest in properties located in Asia-Pacific. These vehicles are aiming to raise $32bn in aggregate commitments. At present, the largest real estate fund in market with a majority focus on Asia-Pacific is GLP China Logistics Fund 1. The fund has a target size of $1.5bn and invests exclusively in China. GLP China Logistics Fund 1 is an opportunistic vehicle, with a focus on industrial assets. So what strategies, property types and countries are these 67 funds interested in?

Opportunistic vehicles account for the largest proportion of the fund pool, with 70% of these funds employing the strategy. One of the findings of Preqin Investor Outlook: Alternative Assets, H2 2013 is that opportunistic funds will be the most sought after strategy by investors in unlisted vehicles in the 12 months following August 2013. Taken together, this suggests that fund managers are in tune with investor preference and there is a general alignment of strategy between managers and investors. Value-added funds make up 37% of Asia-Pacific focused private real estate funds in market, while debt vehicles account for 16%. Funds that take core and core-plus approaches comprise 13% of these vehicles respectively, while funds investing in distressed assets make up 10% of the corpus. Thirty-one percent of the 67 funds targeting the Asia-Pacific market are first-time funds.

In terms of geographical preference, China is the most favoured location (43%) among private real estate funds investing in the Asia-Pacific region. The second most common country is India, with 37% of vehicles having a preference for Indian assets. Japan (21%), Hong Kong (15%) and Australia (12%) make up the rest of the top five locations preferred by fund managers.

With respect to the property sector, 63% of private real estate funds in market investing in Asia-Pacific will target residential assets, that include apartments and multi-family dwellings. This can partly be attributed to the increasing number of cash-strapped real estate developers in the Asia-Pacific region. This is especially so in countries such as China and India where demand for residential assets is strong. Thirty-nine percent of the fund pool has a preference for office buildings, while 37% have an interest in diversified properties such as commercial and mixed use assets.

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