PAG Real Estate Closes Japan-Focused Opportunity Fund at $1.9B

The real estate arm of Hong Kong-based investment manager PAG has reached the final closing of its latest opportunistic Asian real estate fund with $1.9 billion in investor commitments, topping its initial target of $1.5 billion.

The Secured Capital Real Estate Partners VI (SCREP VI) fund, which began formal fundraising in the third quarter of 2016, drew on strong interest from global institutional investors to hit its $1.9 billion hard cap, according to an announcement by PAG Real Estate.

The fund will focus on distressed debt and property investments in Japan, along with other opportunistic real estate assets in markets including China and South Korea.

The vehicle, which held its first close last December with $1.2 billion in capital commitments, has already closed eight deals totalling more than $400 million, including outstanding transactions in Japan, mainland China and Hong Kong.

PAG Sees Strong Returns in Japan

“PAG has a well-recognized track record of delivering strong returns across investment cycles, as our previous six funds have shown,” commented Jon-Paul Toppino, managing partner of PAG Real Estate and group president of PAG in the statement. “We firmly believe that the Japan market will continue to offer strong risk-adjusted returns, and our experienced regional team is well-placed to capitalize on further opportunities throughout Asia.”

SCREP VI is the seventh opportunistic fund launched by PAG Real Estate, which currently manages $5 billion in property assets across the region. The latest vehicle is about 65 percent focused on Japan, according to PAG’s corporate website. The investment manager set up SCREP VI to build on the success of its SCREP V opportunity fund, which earlier this year was reported to be projecting internal rates of return of more than 50 percent.

CPPIB Re-Ups for Latest Fund

For its most recent fund, PAG said it has raised money from strategic partners including major institutional investors based in North America, Europe and Asia. The backers include Canada Pension Plan Investment Board (CCPIB), which this past February revealed that Canada’s largest pension fund had committed $375 million to take an approximate 25 percent stake in the PAG vehicle.

PAG, formerly known as Pacific Alliance Group, has invested over $25 billion into more than 6,700 properties across Asia, including value-add, core-plus and opportunistic deals. In July 2015, the alternative asset manager bought a $1 billion portfolio of office properties in Japan from GE through its PAG Real Estate Partners (PREP) core-plus fund.

PREP closed in June 2016 with $1.3 billion in capital commitments, after initially targetting a $1 billion close.