LaSalle Raises Over $1B for Sixth Asia Opportunity Fund on the Way to $1.5B Target

Less than two weeks after LaSalle Investment Management reached a final closing on $987 million for its China logistics strategy, an announcement by one of the real estate fund manager’s partners shows another $1.5 billion on the way for the firm’s pan-Asia vehicle.

The Chicago-based fund manager has raised close to $1.07 billion for LaSalle Asia Opportunity VI, the Arkansas Teacher Retirement System said in a report of its board of trustees’ 27 September meeting, which noted that LaSalle is targeting a fund size of $1.5 billion.

LAO VI aims to deliver a net internal rate of return of 18 percent over an eight-year fund life, with a maximum 70 percent loan-to-value ratio, said the US state’s teacher pension fund, which approved a $50 million commitment to the vehicle at the meeting.

The latest fundraising win for LaSalle comes amid a surge in capital commitments to Asia real estate investment strategies, including a $1.74 billion closing announced by CBRE Investment Management last week and Nuveen winning $213 million in fresh backing in early September.

Record Haul

Should the firm reach its $1.5 billion target for LAO VI, it would represent LaSalle’s biggest haul for the strategy since before the 2008 financial crisis. According to the report, the LAO V iteration achieved a net IRR of 17 percent through 25 investments.

The recipe for this latest iteration of the strategy is a diversified, risk-adjusted portfolio across Asia in sectors and markets with proven resiliency and liquidity, the company said. Showing the vehicle’s opportunistic nature, activities will include the development of core assets, the repositioning of existing properties and the restructuring of distressed properties.

Investors in LAO VI include Asian and Middle East sovereign wealth funds and US public pension funds, according to the report, which said the fund was targeting a first closing in September 2021. As of the time of publication, LaSalle has yet to announce an initial fundraising milestone for the strategy.

Core Asian Markets

The Arkansas announcement outlined 15 pipeline investments for the fund requiring an estimated $964 million in equity, with Japan representing the biggest target geographically in garnering 43 percent of the expected total. Next on the list for LaSalle is mainland China, which is in line for 37 percent of the capital committed, with South Korea set to receive 12 percent and Singapore 8 percent.

By sector, LaSalle is focusing 44 percent of the vehicle’s capital on office, with another 28 percent headed into logistics. Residential is close behind with 27 percent of the cash set to be allocated to housing investments, and just 2 percent is going to the region’s long-suffering hotel sector.

Three acquisitions in the pipeline are already in advanced stages of due diligence, including a 5,772 square metre (62,129 square foot) Tokyo multi-family asset described as undermanaged. The other two properties in advanced discussions are a 17,656 square metre freehold office redevelopment project in Singapore’s CBD and a 128,037 square metre logistics development site near Beijing.

The combined equity requirement for the three pipeline projects is $140 million.

Fundraising Muscle

In 2018, the previous fund in the series, LaSalle Asia Opportunity V, closed on $1.15 billion from 20 external institutional investors based in Asia, the Middle East and the US, topping its initial target of $750 million.

LaSalle, an independent affiliate of property services firm JLL, said the capital raised for LAO V would provide buying power for $3.3 billion worth of assets in key Asian cities across the office, retail, hotel/serviced apartment and logistics segments.

In June 2018, LaSalle announced LAO V’s acquisition of the Hotel Ibis Styles Tokyo Bay for an undisclosed amount. The fund scooped up the 216-room property near Tokyo Disneyland at a time of enthusiasm for hospitality assets, but LAO VI’s roadmap is signalling a more bearish view of the segment amid the COVID-19 pandemic.

Last week, LaSalle announced the $972 million final closing of the LaSalle China Logistics Venture fund, the fund manager’s first dedicated China logistics vehicle. LCLV and its co-investment vehicle have already committed $423 million across 15 investments, including three recent acquisitions in Shanghai, Nanjing and Tianjin.

LaSalle rival CBRE Investment Management has flexed its own fundraising muscle of late. The company formerly known as CBRE Global Investors revealed this week that it has received capital commitments of $1.74 billion for the Asia Value Partners VI fund, which will pursue build- and reposition-to-core opportunities in the most developed and liquid markets of Asia Pacific.

The total amount raised exceeds the initial target of $1.2 billion for the fund and, excluding co-investments, represents a hard cap, CBRE IM said. The news came just one year and seven months after the private fund division of CBRE closed on $900 million for the fifth fund in the Asia value-add series.