Private Real Estate Funds Investing in Asia-Pacific – January 2015

by Jaren Loke

  • 19 Jan 2015
  • RE

Against a backdrop of weakened property markets in China and other Asia-Pacific markets, where deal sourcing has become more challenging, fundraising for capital to be deployed in the Asia-Pacific region seems to show no signs of slowing down. Presently, Preqin’s Real Estate Online service tracks 67 closed-end private real estate funds in market, with an interest in properties located in Asia-Pacific. These private funds are aiming to raise an aggregate $38bn in institutional commitments and have an average target fund size of $590mn, compared to $390mn for funds in market in January 2014. Of these funds on the road, a quarter have achieved a first close, while 21% have held at least two closes, indicating that approximately half of these funds have already deployed capital.

Given the difficulty in sourcing core property deals in Asia, it is not surprising that many fund managers seek value added and opportunistic investments. Funds employing these strategies form the majority (72%) of the 67 vehicles currently raising capital. The average target size of these value added and opportunistic funds with an interest in Asia-Pacific investments is $612mn, which is also substantially higher than the $333mn average target size of the remaining vehicles on the road employing other strategies. In terms of main property types targeted, 39% of funds with an interest in the Asia-Pacific region target residential properties, while 44% target a diversified mix of properties.

The investment location preferences of these 67 funds on the road somewhat reflect the macroeconomic conditions in the Asia-Pacific region. Modi’s business-friendly India overtakes China as the most preferred location for property investments; 36% of the fund pool will target Indian assets. A slowing Chinese economy sees the country fall from the top position as the preferred investment location; 28% of the fund pool has a preference for Chinese property. Nineteen percent of unlisted vehicles in market will adopt a pan-Asian outlook.

Domestic firms represent the majority (78%) of managers currently fundraising for vehicles with an interest in the Asia-Pacific region. US-based managers are the second most numerous, accounting for 18% of managers with funds on the road. One of the largest private real estate funds on the road investing in the Asia-Pacific region is Rockpoint Real Estate Fund V, which is targeting $2.5bn in investor commitments and will also invest in the UK and US. The biggest fund currently in market managed by a non-US based manager is Everbright Ashmore Beijing Tongzhou Real Estate Fund, with a target size of $1.2bn. Both vehicles primarily utilize an opportunistic strategy.

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