Asian Fund Managers Said to Grab 92% of Capital for Regional Real Estate Funds

Money to invest in Asian property is increasingly being raised by real estate fund managers within Asia Pacific according to research released this week by an alternative investment market tracker.

Asia-based fund managers represent 92 percent of the property fundraising focused on the region this year, according to research by Preqin. This year’s dominance represents a continuation of last year’s trend when regional firms accounted for 90 percent of Asia-directed capital raised by property funds tracked by the market intelligence firm.

This “go local” approach to fund-raising is a far cry from 2006 to 2008 when international fund managers were a major players in the Asia-focused real estate fundraising market. Preqin noted that these foreign firms secured between 33 percent and 48 percent of the aggregate annual capital raised during that three-year span.

Managers headquartered in Asia such as Hong Kong-based Gaw Capital and Singapore’s CapitaLand have developed proven track records since then and investors continue to allocated increasing proportions of capital to firms based in Asia.

“The Asian private equity real estate marketplace is coming to be dominated more and more by domestic fund managers, indicative of the growth of the industry in the region,” Andrew Moylan, Head of Real Estate Products at Preqin, said. “Asia-based managers will hope that their greater knowledge and understanding of real estate in the region will continue to attract investor capital.”

It was also pointed out that domestic firms accounted for 17 of the 20 largest private real estate transactions since the beginning of 2015 including the three biggest deals.

Asia-Focused Funds Target More Capital and Riskier Strategies

During the period the report noted an increase in capital targetting the region to $18 billion, although this was still short of the $31 billion Asia-focused funds raised in both 2007 and 2008.

The majority of Asia-focused real estate funds closed since the start of last year operate under riskier strategies — opting either for value-add or opportunistic plays. A total of 23 opportunistic funds secured $11 billion of investor capital since the start of 2015. Additionally, eight-value added funds raised $2.9 billion during this time.

Big Figures But Slippery Facts

While the report highlights a number of interesting trends in Asia’s real estate investment sector, elements of Preqin’s statement also raise questions regarding the underlying data used in the study. In cataloging individual deals, the investment tracking firm listed a rumoured $854 million acquisition by Blackstone of the L’Avenue commercial complex in Shanghai as “the fifth-largest deal overall recorded in the region since 2015.” The acquisition from L Real Estate was reported by some mainland media outlets in last year, but never took place.

As previously reported on Mingtiandi, Angela Leong’s L’Avenue International Holdings earlier this year confirmed that it had purchased L Real Estate’s 50 percent stake in the L’Avenue complex for an undisclosed sum. Preqin’s statement did not provide details that would allow for verification of other transactions included in its report.

Global Firms Still Raising Billions

While domestic firms may be dominating the market, global players are still launching Asia-based funds. In late August, LaSalle Investment Management announced it was looking to raise $750 million to $1 billion for the LaSalle Asia Opportunity Fund V after successfully deploying the previous vehicle in the series.

In May, Morgan Stanley purchased the One Shelley Street office complex for A$525 million ($400 million) to seed its Prime Property Fund Asia, according to the Australian Financial Review. Earlier this year, Denmark’s largest private life insurer, PFA Pension, handed over $200 million to become a cornerstone investor in the fund.

Savills Investment Management announced its plans for the $1 billion core-plus, Savills IM Asia Fund 3 in January. The fund will focus on investing in Australia, Japan, Hong Kong, Singapore and China and continues to source equity from Europe and the US.