PAG has secured a $50 million capital commitment from the Employees Retirement System of Texas for the Hong Kong private equity firm’s third pan-Asian core-plus/value-add real estate fund.
The pledge to PAG Real Estate Partners III was disclosed in a January 2022 report from ERS, a pension fund for the US state’s government employees.
The recently launched PREP III is the latest in the fund series after PREP II, whose mandate is to generate income-driven returns in gateway cities around Asia. PREP II closed on $2.25 billion in 2019. PAG partner Broderick Storie leads the PREP strategy from Hong Kong, while the firm’s SCREP opportunistic strategy is piloted by Jon-Paul Toppino.
The commitment by the $35 billion ERS is the latest in a series of major investments by public pension fund managers in Asia Pacific real estate strategies, following recent wins by Blackstone and other private equity giants.
PAG’s latest fundraising round coincides with at least one big-ticket real estate buy, as Mingtiandi reported last month that the private equity shop had agreed to acquire Cross Street Exchange near Singapore’s Raffles Place for S$810.8 million ($603 million).
The Hong Kong firm picked up the office and retail complex with the goal of upgrading the ageing property, according to sources familiar with the deal who spoke with Mingtiandi in January.
With 74 years remaining on its 99-year leasehold, Cross Street Exchange comprises 305,739 square feet (28,404 square metres) of net lettable office space in its 15-storey office tower and 87,109 square feet of retail space spread across a three-storey retail podium and two sets of heritage shophouses. The property transacted for S$2,064 per square foot of net leasable area.
State Fund Flows
PAG manages about $45 billion in assets for more than 150 institutional investors worldwide.
The firm’s capital boost from the Texas pensions comes in the wake of a bumper fundraising period for Manhattan-based rival Blackstone’s third Asia property fund, helped along by commitments from US state retirement funds.
Mingtiandi reported this week that Blackstone had won a $200 million capital commitment for its Blackstone Real Estate Partners Asia III from the Virginia Retirement System in December, part of nearly $2.4 billion in fresh funds earmarked for the vehicle during the final quarter of 2021.
The closed-end pan-Asia opportunistic fund also chalked up a $100 million commitment from Florida’s State Board of Administration and a $100 million pledge from the Teachers’ Retirement System of Illinois in the quarter.
Blackstone had raised $6.38 billion for BREP Asia III as of 31 December 2021, according to the private equity giant’s earnings report released last month, with a target size of $9 billion for the vehicle.
The salvo of fund commitments announced in recent weeks comes after capital raised by Asia Pacific-focused vehicles declined to $25.04 billion in 2021, which was down 29.9 percent from the total a year earlier, according to real estate information provider Realfin.