SC Capital Planning $400 Mil Asia Property Fund

Singapore’s SC Capital Partners says it is launching a new $400 million Asia property fund this week, following soon after the successful $850 million close of its RECAP IV fund earlier this year.

For this latest investment vehicle, the asset manager says that it will focus on more developed markets in Asia, such as Japan and Australia, while devoting less of its capital to emerging markets such as China, despite what it says is more realistic pricing on the mainland this year.

Based on SC’s statements about the focus of this latest fund, and on the way that it has deployed its RECAP IV fund to date, the Singaporean firm may be competing against China’s outbound investment giants such as Fosun and Wanda for assets in more developed markets, rather than searching for yield on the mainland.

Singaporean Asset Manager Likes Australia

In addition to Australia and Japan, SC’s new investment vehicle will also focus on other “more liquid and transparent” markets in the region, such as New Zealand, Hong Kong, Singapore and South Korea, according to an account in Bloomberg. Together, the company foresees that these markets will account for about 80 percent of the fund’s investments.

SC’s Thai-Chinese Managing Director, Suchad Chiaranussatti told the news agency that, “We are looking to provide long-term appreciation in the Asia-Pacific, which will be the main economic driver in the world.” Mr Suchad says that the fund is targetting returns of around 10 percent from both rental yields and capital gains on asset disposals. The account did not specify a duration for the fund.

If the asset manager’s newest fund is spent in the same way that RECAP IV has been invested, then the Australian market could see even more deals happening

In March this year SC invested $146 million to acquire a 50 percent stake in a Melbourne property portfolio, using funds from its RECAP IV vehicle, which is closed in January.

Prior to the March deal, SC had already purchased a retail complex in Melbourne in December, and in February invested $85 million to acquire a resort in Darwin, Australia.

While mainland buyers of Australian real estate have received increasing attention recently, according to research by Savills, Singaporeans bought more commercial property down under ($897 million) in 2014, than mainlanders did ($874 million).

China Yields Too Low

In his comments on the China market in 2015, Mr Suchad echoed the sentiments of a number of fund managers.

The London School of Economics-trained financier noted that currently, commercial property investments in China’s major cities yield about four percent, and in other areas there may be lower yields, or none at all. However, he did point out that the slowdown in investment on the mainland has helped to cool down asset price inflation.

“China has opportunities, we are seeing more realistic pricing than we have seen in the last 10 years,” Mr Suchad told Bloomberg.

Mr Suchad said that this latest fund will still devote at least part of its capital to investments on the mainland, and predicted that yields should rise to eight to ten percent as the market, and seller expectations, normalise.