CapitaLand Reaches $391M First Close on Value-Add Office Fund

CapitaLand has reached a $391 million first close on its first ever discretionary equity investment fund, according to an announcement today by the Singaporean real estate giant.

The CapitaLand Asia Partners I (CAP I) fund, is dedicated to value-add office investments in top cities in mainland China and Japan, in addition to the company’s home city, according to the company, which did not specify a target investment amount for the fund’s final closing.

The investment milestone comes just nine months after CapitaLand’s Investment Management business began raising capital for the vehicle and less than two months after the division, which is managed by former HSBC and Morgan Stanley executive James Lim, reached a $556 million first close on its Credo I real estate debt fund.

Pursuing Opportunities in Asia’s Core Office Markets

CapitaLand Asia Partners I will target opportunities to invest in what it terms transitional office projects in Tokyo and Osaka in Japan, and in mainland China’s first tier cities of Beijing, Shanghai, Shenzhen and Guangzhou, as well as Singapore.

“CAP I is CapitaLand’s first discretionary private equity fund that allows us to make full investment and asset management decisions on behalf of our capital partners,” Lee Chee Koon, CapitaLand’s President & Group CEO said in a statement. “The expansion from our traditional club funds to commingled fund provides CapitaLand with more diverse capital partners, and the speed of CAP I’s first closing demonstrates investors’ confidence in CapitaLand’s ability to deliver strong returns for their investments.”

Lee pointed to ongoing demand for quality commercial property in Asia’s gateway cities, combined with inadequate supply as creating opportunities to invest in renovation or repositioning of aging office buildings.

The fund’s investors, which were not named, were said to include pension funds, insurers and other financial institutions from Asia and Europe. By raising nearly $400 million for the equity fund since July last year, at much the same time that the Investment Management team was raising its China debt vehicle, the fund management arm of CapitaLand has now raised more than $900 million since July of last year.

Existing Funds at Work in China and Vietnam

The new fund is CapitaLand’s first ever discretionary equity vehicle, with the company operating as a traditional general partner investing a pooled fund at its discretion rather than operating on a joint venture or club investment basis with its investors. CAP I is understood to feature an entirely new set of limited partners from the CREDO I vehicle, which was CapitaLand’s inaugural discretionary debt fund.

“We are delighted with the successful first closing of CAP I and welcome several new investors to the CapitaLand’s fund management platform. CAP I has a ready pipeline of investment opportunities for capital deployment and we expect to deploy capital in the coming months,” Lim, CEO of CapitaLand Investment Management said in the statement. “We look forward to creating value through sound asset management strategies and delivering robust and attractive risk adjustedreturns for our investors.

Lim added that his division is now in advanced discussions with several groups en route to subsequent closings for the fund.”

In November of 2018 CapitaLand used its Raffles City China Investment Partners III (RCCIP III) fund, a $1.5 billion vehicle set up with investors from Asia, North America and the Middle East, including Canada’s CPPIB (Canada Pension Plan Investment Board), to fund the $1.85 billion acquisition of the Star Harbour International Center project (上海星外滩) in Shanghai’s Hongkou district in a joint venture with Singaporean sovereign wealth fund GIC.

Thanks to its collection of REITs and private funds, CapitaLand was Asia’s largest real estate fund manager in 2018, according to a survey by industry non-profit group ANREV. In 2016, the Temasek Holdings-backed conglomerate had set up the RCCIP III fund, which focuses on opportunities for developing mixed-use commercial developments in China’s gateway cities. During that same year it established a $500 million office fund dedicated to the Vietnam market.

Asia’s Biggest Real Estate Manager Expands Discretionary Funds

With the successful fund raising for the new equity fund following less than two months after the first closing of its debt vehicle CapitaLand, seems determined to establish itself as a competitor for the world’s largest alternative asset players as a manager of discretionary funds.

Since Lim joined in late 2017 the company has been expanding its CapitaLand Investment Management business by hiring a team of experienced fund managers experienced in operating pooled, discretionary funds that will allow the group to make investments using less of its own capital.

For the Raffles City China Investment Partners III fund, CapitaLand supplied nearly 42 percent of the equity from its own balance sheet. As a discretionary fund manager, CapitaLand Investment Management business is also more likely to be collecting traditional private equity fees for its general partner duties.