The Asian private real estate market has seen an increase in appetite from institutional investors such as pension schemes and endowment plans in recent years. Baring Private Equity Asia’s maiden Asia-focused property fund wrapped up fundraising in March 2015, raising $365mn in total capital commitments from investors, which include at least three US-based pension schemes. Additionally, larger private equity real estate firms are acquiring smaller Asia-based fund managers in order to increase their exposure. In May 2015, US-based Apollo Global Real Estate Management started making plans to launch an Asia-focused real estate platform following its acquisition of Hong Kong-based firm Venator Real Estate Capital Partners.
Preqin’s Real Estate Online service currently tracks 983 institutional investors with an interest in private real estate funds targeting Asia. Collectively, these firms hold a combined $28tn in total assets and have approximately $1.3tn allocated to real estate. As the chart above shows, over half of these institutions are headquartered in North America. A notable US-based institution that has held a long-term interest in Asia-focused real estate is CPP Investment Board. The Canada-based pension scheme established a partnership with real estate fund manager Goodman to invest an initial $300mn in China in 2009. As of November 2014, both CPP Investment Board and Goodman had allocated a combined $2bn to invest in and develop prime logistic assets across China.
In terms of strategy, investors with a preference for Asia are targeting higher risk strategies: 79% of institutions target opportunistic vehicles and 72% target value added opportunities. In contrast, 60% and 45% target lower risk core and core-plus funds respectively.