Chelsfield Closes $363M Asia Fund to Hunt for Downturn Bargains

Chelsfield Asia has closed its first value-add pan-Asia fund at $362.5 million, as the Asia arm of the UK developer readies to deploy dry powder in what CEO Nick Loup calls a “once-in-a-generation opportunity for investing”.

Alongside the $362.5 million bagged for Chelsfield Asia Fund 1 (CAF 1), the firm has secured a $150 million co-investment sidecar for future deals, while raising $366 million in additional co-investment commitments from the likes of real estate fund manager Pamfleet and Hong Kong-listed developer CSI Properties.

With the fund now fully deployed across five investments in Hong Kong, Shanghai, Singapore, and Tokyo, the total amount of equity raised by the vehicle stands at $878.5 million.

Chelsfield Asia’s CEO, Nick Loup, told Mingtiandi that the firm still has a significant amount of unallocated capital in the sidecar which will be used to target opportunities as Asia comes out of the COVID-19 crisis.

“We genuinely feel that it is the ideal time to be prepared with dry powder and to be patiently and carefully considering new opportunities,” Loup said.

Teaming Up with Members of the Club

Focusing on a value add strategy, Chelsfield has closed the fund after reaching a first close in June 2017 at $121.5 million.

The investment vehicle has drawn commitments from six institutional investors including a sovereign wealth fund, a US-based pension fund, a global investment group from the Middle East, a corporate investor from Asia, a Hong Kong family office, and a global fund of funds.

Loup, who has helped Chelsfield rapidly establish a presence in Asia after being brought on board in 2015 from Grosvenor where he had served as Asia CEO, said that the success of the fund has also been due to working with long term associates such as Asia Standard International and Malaysian developer Amcorp Properties Berhad.

Adding Value to  Assets

CAF 1, which aims to add value to the assets it acquires via physical, operational and capital improvements, has made acquisitions worth a total $1.1 billion, according to Loup.

Just last August, the fund teamed up with Pamfleet to acquire the office component of Shanghai’s Lifehub@Daning project for a consideration of RMB 1.5 billion ($210 million).

In that deal, the UK firm set up a joint venture with Amcorp Properties and a pair of companies controlled by the Fu family to acquire a 50 percent stake in the project’s four office properties, while Pamfleet took the remaining half stake in the assets.

Teaming Up with ARA in Singapore

Eight months before that Shanghai deal, the Chelsfield fund teamed up with ARA Asset Management through a 50:50 joint venture to acquire Singapore’s Manulife Centre, a 241,388 square foot (22,426 square metre) mixed-use building now rebranded as 5One Central for S$555 million.

The JV has repositioned the freshly re-clad 11-storey building – which is located along the Orchard corridor in the Bras Basah area – by bringing in new tech tenants which take up 20 percent of the space, while also securing coworking operator JustCo as an anchor tenant.

The Chelsfield–ARA team has also increased the property’s net leasable space by 6.5 percent and has created a walkway through the building connecting to an upgraded retail space.

The team has similarly rebranded the Provident Square shopping centre in Hong Kong’s North Point area, after teaming up with Pamfleet to acquire the mall from from CK Asset-sponsored Fortune REIT for HK$2 billion in December 2017.

Now rebranded as Worfu, following a redesign by design firm Lead 8, the JV has increased the proportion of F&B space in the facility to around 20 percent of the total net leasable area from the previous 3 percent, while also adding a sports centre, and working with London-based French artist and designer Camille Walala to decorate the property with 54-metre long mural.

Eyeing Future Opportunities

With plenty of dry powder at Chelsfield’s disposal, Loup said that the COVID-19 crisis has encouraged rather than spooked his long-term investment partners .

“We are extremely lucky with the investors who have joined us in that they are very mature investors who have been through many cycles,” Loup said.

Although not revealing specifics, the Chelsfield Asia chief identified Japan as being a potentially attractive target for future acquisitions.

Whereas prior to the pandemic, capital values in the country had looked expensive and the investment cycle appeared to be closing in on peak levels, the recession may present opportunities for value-add investments across the country’s office, hotel, and vertical retail properties, according to Loup.