AEW Holds Final Close of Third APAC Value-Add Fund at $1.12B

Global real estate investment manager AEW has achieved the final close of its third Asia Pacific value-added fund with total commitments of $1.12 billion, far surpassing its $750 million fundraising target.

An array of US and Europe-based public and private pensions funds and insurance firms threw capital into the fund, AEW Value Investors Asia III, which will focus on building up a portfolio of assets in key gateway cities across the region.

The fund, which has so far closed on four investments, will target acquisitions primarily in Hong Kong, Singapore, Seoul, Shanghai and Sydney, as well as Beijing and Melbourne. The $1.12 billion total includes client co-investment capital, according to an announcement by AEW.

Latest Fund to Add to Deals in Sydney, Seoul

The Boston-based company said that all of the institutional investors in the predecessor fund made capital commitments to VIA III, which also brought new partners on board. The previous fund in the series, AEW Value Investors Asia II, closed in June 2016 with a capitalisation of over $640.2 million including $50 million of co-investment capital, and has achieved realisations on nearly half of its investments.

US state pension fund Florida State Board of Administration (SBA) said it had invested $100 million in VIA III, according to a report, following a $100 million commitment by California State Teachers’ Retirement System and a $50 million investment from the Los Angeles County Employees Retirement Association. The fund is understood to have a hard cap of $850 million.

Like its predecessor, the newly closed fund seeks to create value by repositioning, refurbishing and releasing commercial real estate assets. The vehicle has already assembled a portfolio of assets in Seoul and Sydney, including the North Sydney market, where AEW last month bought up a 14-storey office block at 54 Miller Street for A$59.4 million ($45 million) on behalf of the strategy. The seller was Aqualand Property, the Australian arm of China’s Shanghai Shenglong Investment.

$73B Fund Manager Active in China

AEW was reported to have bagged the 11th and final property acquisition for its previous fund in the series by purchasing Innov Tower, a fully leased office building in Shanghai’s Caohejing High-Tech Park from CapitaLand for $226 million just over a year ago.

The same vehicle also flipped a grade B, 14-storey office tower in the city to Singapore’s Ascendas-Singbridge for a reported sum of about RMB 1.35 billion ($195 million) in March 2017. AEW paid about $147.2 million to pick up the asset from Blackstone in June 2015 on behalf of the fund.

The private equity firm, along with its affiliates, manages over $73 billion in property and securities across North America, Europe and Asia. The firm’s Asian operations are headed by David Schaefer, via offices in Hong Kong, Singapore and Sydney.

In addition to its deals with Singapore-based developers, AEW has also linked up with mainland sovereign wealth fund China Investment Corporation (CIC) to purchase a horde of 10 shopping malls in France and Belgium from CBRE Global Investors for €1.3 billion ($1.44 billion) in 2015.

The latest announcement by AEW came a day before US private equity giant Blackstone announced it had closed its Blackstone Real Estate Partners Asia II (BREP II) fund at about $7.1 billion of commitments, the region’s largest-ever property investment fund.