PGIM Heads for $1B Final Close on Fourth APAC Value-Add Fund

PGIM Real Estate is on the verge of closing on over $1 billion in equity for its latest Asia Pacific value-add fund, as the Prudential affiliate becomes the latest real estate private equity firm to outperform capital raising expectations during the pandemic.

The real estate fund manager has now raised €800 million ($971 million) for AVP IV, the fourth iteration of its closed-ended value-add fund for the region, with the company’s head of Asia Pacific, Benett Theseira indicating to Mingtiandi that PGIM Real Estate expects to bring that total to €850 million within the next two months.

“The successful fund raise demonstrates continued confidence in our platform’s ability to deliver attractive risk adjusted returns and the belief that the Asia Pacific region is poised to lead the global recovery from the COVID-19 crisis,” Theseira said.

When PGIM launched began capitalising the fund in 2019 it was targetting €750 million for the value-add vehicle, with the company attributing a portion of its fund-raising success to rising expectations for Asia Pacific post-crisis.

Beds, Sheds and Data Centres

PGIM began raising capital for version four of its APAC value-add series in 2019, soon after it had finished investing the €580 million that it had raised for version three. Now the company is ready to start deploying some of its war chest into asset classes including logistics, residential and data centres.

“We see logistics as interesting because of the strong trade activity from both exports and intra-regionally, and of course very strong e-commerce growth,”  Theseira said.

Within the logistics sector he indicated that China is taking top priority, and the company hopes to announce deals there in the near future. PGIM Real Estate is also prioritising Singapore, Japan and Australia although Theseira noted that the sector is interesting globally.

Another primary theme for PGIM in Asia Pacific is multi-family residential, where it has been investing across a number of its strategies.

“Multi-family is a priority sector for us because it’s very resilient, and we have been investing in multi-family for many years in Japan through our different strategies,” Theseira said.

Just this week Hong Kong-based investor Alyssa Partners revealed that it had teamed up with PGIM Real Estate in a JPY 9.2 billion ($88 million) purchase of four newly completed apartment projects in Tokyo containing 282 homes. That deal was revealed just a few weeks after PGIM announced a $120 million acquisition of a six building apartment portfolio in Tokyo and Yokohama under its core strategy.

The company is expecting to be able to announce investments in Australia’s residential sector as well, where they are focused on the build-to-sell sector, particularly with deals in the Sydney area said to be in the works.

Also said to be on the way in Australia are PGIM’s first data centre investments, where the fund manager aims to take advantage of growing demand for cloud computing resources and server hosting.

“It’s a sector that we identified two years ago and set up a team to evaluate,” Theseira said, adding that PGIM has been leveraging its relationships with data centre operators in the US as it prepares to make investments in the sector within the APAC region.

“Data centres are in vogue, due to the way that the pandemic has shifted business activity online,” Theseira said, while identifying Japan, Singapore and Australia as top targets for its investments in the tech-enabled sector. The company hopes to announce some Australia investments in the sector soon.

Rebound with the Region

While PGIM had looked at potential acquisitions after reaching its first close for AVP IV in 2019, Theseira sees 2021 as a more inviting opportunity after asset values had grown frothy pre-pandemic.

“We were very lucky that we hadn’t started to invest before the pandemic hit and this has positioned us very well coming out of the crisis,” Theseira said.

In a recently released white paper, PGIM pointed to the Asia Pacific region as having some advantages over Europe and North America as the world gets ready to move on from the crisis, and asserts that economies in the region “are well placed to recover earlier and stronger than the rest of the world.”

Equipped with offices in Singapore, Tokyo, Shanghai, Hong Kong, Seoul and Sydney, Theseira said that the depth of PGIM’s presence in the region has positioned the firm to move forward with deals quickly, while international travel remains restricted.

Partners Old and New

For its latest fund, PGIM reached its first close entirely through participation by investors from its third value-add vehicle, with the final round subscribed by both existing and new partners.

“In addition to retaining a substantial number of clients who have invested with us in our prior funds, our proven track record across the fund series and in the region has allowed us to broaden our client base, attracting new investors from Europe and Asia Pacific,” said David Fassbender, portfolio manager for the value-add fund series and head of Southeast Asia for PGIM Real Estate.

The company launched its first Asia Pacific value-add fund in 2003, and reached a final close on version three in 2016. In the 17-year lifespan of the series, PGIM has carried out over 60 transactions across all of the major sectors and nine markets in Asia Pacific, representing acquisitions and developments worth more than $7 billion.

The series has now raised nearly $3.7 billion in capital across its four funds.