LaSalle Raises $1B to Invest in Asian Real Estate

Despite signs of a downturn in Asian property markets, the region’s real estate sector received another vote of confidence from international investors this week, when LaSalle Investment Management announced its successful recruitment of $1 billion in new equity for investment in property opportunities in Asia Pacific.

The global real estate investment manager today announced that it had raised the equity investment in part as a final close on its LaSalle Asia Opportunity Fund IV (LAOF IV), as well as for two additional account mandates. The final close for the LAOF IV fund secured total commitments of US$485 million plus US$100 million of co-investment capital for China logistics deals.

Commenting on the successful round of fundraising, Jon Zehner, Global Head of the Client Capital Group at LaSalle used the opportunity to point out the continuing appeal of Asian real estate for those seeking returns on their capital. “Global investors continue to see the potential of investing in Asia-Pacific and are generally under- allocated to real estate in the region,” Zehner noted.

This latest fund is the fourth in a series of opportunity funds launched by LaSalle focusing on the Asia-Pacific region. In a statement, the fund manager, which is part of the Jones Lang LaSalle Group, indicated that investors in the vehicle include sovereign wealth and pension funds from the United States, the Middle East and Europe, including the Illinois Teachers Retirement System, San Diego City Employees’ Retirement System and Arkansas Teachers Retirement System.

According to LaSalle, it sees attractive investment opportunities in income producing assets in Japan, logistics assets and special situations in Korea, retail and urban for-sale residential developments in Australia, and the development of logistics assets in Tier 1 and Tier 2 cities in mainland China.

The fund manager’s decision to dedicate $100 million for logistics investments in China brings it into line with a trend that has seen more than $3 billion earmarked for investment in the development of warehouses in the country during the past year. Warehouse developers in China are currently enjoying investment yields of 8.5 to 9 percent on average as the country’s rapidly expanding retail sector struggles to find distribution centres to move its merchandise.

The investment strategies for the two separate account mandates are said to focus on income producing assets in Japan and Australia that require active asset management plans. LaSalle indicated that these “value-add” strategies are targeting total gross returns in the mid-teens with a significant portion of these coming from current, in-place cash flow.

Over the past 12 months, 24 private equity funds targeting Asia Pacific have raised an aggregate of US$9.3 billion, according to Preqin. Of those funds US$3.3 billion exclusively target China, while another US$3.2 billion are regional funds which include a China allocation. The high proportion to China indicates investors anticipate attractive buying opportunities in that market.