TH Real Estate Launches $2B Asia Pacific Cities Fund

Global property investment manager TH Real Estate announced on Thursday that it has launched a $2 billion open-end core property fund focused on key cities in the Asia Pacific region. The manager’s parent company, Teachers Insurance and Annuity Association of America (TIAA), has committed an initial co-investment of $200 million.

The new fund is the fourth in the firm’s “global resilient cities series” and will invest in 17 selected “future-proof” Asia Pacific cities, including Sydney, Tokyo, Brisbane, Singapore and Seoul, according to a company statement.

The Asia Pacific Cities Fund focuses on what it calls well-positioned assets across the office, retail, residential and industrial sectors which are set to benefit from long-term structural trends, including demographic change, urbanization and technology.

Core Fund Aims for 7-10% Returns

Aimed at institutional investors, TH says that its the new fund is targeting a long term return of seven to 10 percent per annum. The manager intends to raise $2 billion over a five-year horizon.

Louise Kavanagh, who joined the financial giant last December from Invesco to run TH’s regional operation from Hong Kong, said in the statement that her team would use a granular approach to stock selection, focusing on asset and submarket drivers to complement a cities-based approach and to enhance returns to clients.

“Our long-term investment approach seeks strong returns through market cycles, underpinned by structural trends for long-term growth, tapping into Asia-Pacific’s growing economic dominance,” she added.

Core Fund Takes on Redevelopment of Listed Building in Sydney

To kick off the new fund, TH announced that it has purchased a Sydney office project from local developer Built for A$180 million ($130 million).

The heritage redevelopment project at 183-185 Clarence Street in central Sydney is approved for construction of 7,900 square metres (85,000 square feet) of commercial space across 12 floors, including the two listed buildings that currently occupy the 1,000 square metre site.

Built acquired the site from the Vietnam’s Vingroup for A$22.5 million last year and put the project on the market in August this year, shortly after winning approval for a plan by design group Fjmt to redevelop the site.

“We have taken two heritage buildings in the centre of Sydney’s Western Corridor that have sat in the too hard basket for developers in the past and worked closely with fjmt, City of Sydney and used our own experience in complex refurbishment to work around the challenges and unlock the potential of these assets,” Brett Mason, managing director of Built said in a statement.

Sydney a Top Target for TH

According to Kavanagh, Sydney is a key investment market for the fund, experiencing healthy rental growth and prevailing demand fundamentals, making it a great addition in the portfolio. In Australia, the fund will also look for investments in Melbourne, Brisbane, Canberra, Perth and Adelaide.

The Asia Pacific Cities Fund follows the model of TH Real Estate’s core, open-ended European Cities Fund which was launched in 2016. The real estate investment manager has seen the launch of two other funds this year in their global cities series – a global cities REIT, in partnership with its affiliate Nuveen, for retail investors in the US, and a fund focusing on retail opportunities in key US cities.

After the affiliate of US-based Nuveen opened its Hong Kong office last year, TH Real Estate has been stepping up its activity in the region.

Together with Gaw Capital and German insurance giant Allianz Group, TH last November reached a $2 billion first close on a joint venture fund targeting high-end outlet malls across China. Allianz owns 30 percent of the platform, with Gaw acting as co-capital sponsor. TH Real Estate, with a $7 billion global outlet mall portfolio, manages the fund while RDM Asia – part of Italy’s Fingen Group and owner of the Florentia Village brand – manages the mall assets.