Chicago-based Heitman LLC has raised $338 million for a new closed-end fund targeting property in the region from Melbourne to Tokyo. Demand was seen as strong, as the initial target for the Heitman Asia-Pacific Property Investors (HAPI) vehicle was only $250 million.
The $40 billion assets-under-management investment firm announced the final closing of the fund in a 26 July press release. Heitman, which has been involved in East Asia since 2008 and made its first investment in the region in 2011, already has $3 billion committed to Asia-Pacific assets.
HAPI closes at a time when US-based investors are pouring into the region seeking property opportunities. Names like BlackStone, Warburg Pincus, Morgan Stanley, AEW and Carlyle have funds targeting Asian real estate, with one recent close topping out at $7.1 billion. US pensions are showing a strong appetite for Asian property assets and are becoming major investors in these vehicles.
A Few Deals in Mind
The Heitman fund has already committed to a number investments, in Tokyo, Melbourne and Hong Kong. Other possible destinations for capital deployment are Osaka, Sydney, Brisbane, Hong Kong, Singapore and Seoul, according to the statement.
The fund is seeking traditional assets, such as retail, logistics, residential and office space, as well as specialty assets, such as self-storage, student accommodation and medical offices, it said in the statement. Heitman will be searching for opportunities where value can be achieved through repositioning, redevelopment or expansion.
“Our team is well positioned to assemble a diversified portfolio of real estate assets in the dominant urban economies of Asia-Pacific’s deepest and most transparent markets,” said Skip Schwartz, Heitman managing director of Asia-Pacific Private Equity and portfolio manager for HAPI.
Schwartz has been based in Hong Kong since 2013, when he was transferred from Heitman’s Tokyo office. He has also worked in Frankfurt, London and Chicago for the company.
Asian Assets Popular with Pension Funds
HAPI has received considerable support from major US institutional investors. According to press reports, the Ohio Police & Fire Pension Fund committed $50 million, Los Angeles Fire and Police Pensions (LAFPP) invested $50 million, and the Los Angeles City Employees Retirement System (LACERS) committed up to $25 million. The pension funds have been told that HAPI will be aiming for a net internal rate of return of between 10-12 percent, the reports say.
Deal Street Asia writes that Heitman may have been looking for $500 million originally when it began marketing the fund in 2014. SEC filings also suggest that the target may at one point have been higher than $250 million, placing the total offering amount at $350 million.
Management Buyout Ahead of Fund
Heitman was founded in 1966 and has 11 offices globally and a total of 325 employees. Until January 2018, it was 50 percent owned by OM Asset Management (OMAM), once part of Anglo-South African financial services company Old Mutual and now known as BrightSphere. OMAM’s stake was bought by 40 executives who owned the other half of the company.
Heitman has two other value-added funds. These are the Value Heitman Partner series, which is closed ended and focused on North America, and the Heitman European Partners Property series. In Asia, the company has offices in Hong Kong, Seoul, Melbourne and Tokyo.