SilkRoad Property Partners on Wednesday announced the final closing of its latest real estate fund, Silk Road Asia Value Partners II (SAVP II), at $549 million, exceeding the investment manager’s $500 million target.
The company announced its latest financial milestone after having closed on six investments for the new vehicle, primarily in pandemic-resistant assets such as industrial and neighbourhood retail, according to a statement.
The closing came despite the COVID-19 crisis having led SilkRoad to extend the fund raising period for SAVP II, after the vehicle reached a first $377 million first closing in the fourth quarter of 2018.
Raising a COVID-Resistant Fund
“We are very grateful to our investors, many of whom have supported us since our business began, and all of whom have supported us through this challenging year,” said SilkRoad chief executive Peter Wittendorp. “We believe this is a testament to our commitment to our fiduciary duty, execution capabilities and proven track record. Our returns have been generated through active value creation, with very modest usage of leverage.”
SilkRoad says its latest fund will employ a proven value-add strategy, targeting properties with favourable risk-return profiles in Singapore, Hong Kong, and Tokyo, as well as in the mainland hubs of Beijing, Shanghai and the Greater Bay Area.
The firm indicated that it had received unanimous support from its backers for extending the fund raising period for SAVP II, with the venture having drawn investment from insurance firms, endowments, pension funds and other institutions from Europe, North America and Asia.
SAVP II is the third value-added fund managed by SilkRoad since its founding in 2012. With this fund, SilkRoad has raised and managed $1.58 billion in equity in its value-add series.
Selling Off Shophouses in SG
Wittendorp said the firm’s “classic” value-add strategy in Asia has found a permanent place in the portfolios of international institutional investors looking to diversify their exposure while maintaining strong returns with modest risks through cycles.
He pointed to the firm’s successful divestment just last month of a set of three conservation shophouses in Singapore, which SilkRoad disposed of for $21.3 million ($16 million), which exceeded its underwriting return despite the current public health crisis. Measuring 5,677 square feet (527 square metres), SilkRoad sold the adjoining properties at 44-46 Amoy Street for the equivalent of $3,752 per square foot, after a three-year holding period.
Located near the junction of Amoy and Cecil streets, the properties are zoned commercial and occupy a 2,646 square foot lot near the Telok Ayer and Tanjong Pagar MRT stations under a 999-year leasehold.
SilkRoad acquired the asset in 2017 and carried out an extensive interior renovation of the heritage buildings. Through the value-add effort, the firm was able to increase occupancy from 14 percent at acquisition to 100 percent at exit, and SilkRoad divested at a price that was above the pre-COVID valuation, the company said.
“We will continue to unlock the value of the shophouses in our portfolio and expect demand for these scarce assets to be resilient,” said George Kang, SilkRoad’s head of Singapore.
In June 2016, SilkRoad made the final closing of SAVP II’s predecessor, SilkRoad Asia Value Partners, at $445.5 million, exceeding the target of $350 million. That fund had been launched in August 2014 and achieved its first closing in December 2014 with an amount of $230 million.