Investment Opportunities in Asia-Pacific-Focused Private Real Estate Funds – October 2014

by Joyce Chee

  • 29 Oct 2014
  • RE

Preqin’s Real Estate Online service currently tracks 58 unlisted real estate vehicles in market targeting properties located in Asia-Pacific. These private funds are aiming to raise approximately $23bn in aggregate commitments. Of these Asia-Pacific-focused funds, 48% have held an interim close, indicating that some of these funds have already deployed capital. At present, the largest private real estate fund in market with a focus on Asia-Pacific is Blackstone Real Estate Partners Asia. The opportunistic vehicle exceeded its $4bn target when it held its fourth close in July 2014 at $4.1bn.

India attracts the highest proportion (41%) of private real estate funds in the Asia-Pacific region. China is the second most preferred (28%) destination, while 22% of Asia-Pacific-focused funds in market are inclined towards Japanese property. Hong Kong and Singapore are each favoured by 14% of Asia-Pacific-focused vehicles. Interestingly, the top two preferred locations consist of developing economies while Japan, Hong Kong and Singapore have relatively mature and developed markets.

As can be seen in the chart below, opportunistic funds make up the largest proportion (48%) of the Asia-Pacific-focused fund pool, while the value added strategy is most favoured (39%) among funds investing across the rest of the world. Distressed real estate is the least adopted strategy, representing just 2% of Asia-Pacific-focused funds in market and 5% of funds in market targeting all other locations. The higher economic growth enjoyed by the Asia-Pacific region compared to other parts of the world is quite possibly why debt opportunities are not as numerous as other strategies. 

Opportunistic funds are looking to raise $14bn in aggregate capital commitments, representing a significant 62% of the overall target of Asia-Pacific-focused real estate vehicles. This is hardly surprising considering the top two favoured locations in Asia – China and India – are developing countries with a high demand for property assets. This trend looks likely to continue in the near future with the introduction of property regulations in both nations. In August 2014, China introduced Circular 340 – a ruling which simplifies the application process for overseas investors purchasing real estate by reducing a two-step approval process to a single one. In the same month, India also approved the creation of REITs, which could provide an alternative exit route for unlisted vehicles. 

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