Aberdeen Asset Management has launched a $400 million co-investment joint-venture vehicle with GE Capital Real Estate to invest in residential real estate in Tokyo.
Aberdeen manages about $1 billion in assets invested into Asia-Pacific real estate via a fund of funds approach, as well as through separate accounts, although outside the region it does run private equity property funds.
This is its first JV and Puay-ju Kang, who runs the firm’s regional property exposures with a team of five based in Singapore, says it may seek out more deals in Asia with alternative structures.
She explains that the need for a different approach came about because the closing risks associated with the traditional funds format have been heightened post financial crisis due to the lower level of equity capital available.
“In the aftermath of the global financial crisis, we found ourselves with capital to deploy and views on where it wanted to deploy it, but we were confronted with a significant constraint in terms of how fund managers were able to get a fund off the ground,” she explains.
Last year Aberdeen started to look at club deals – similar to traditional private equity funds but involving a smaller group of strategically aligned investors that require almost no fundraising period and greater control – as well as joint-ventures.
It invested in a club deal in Australia last year, and now it has invested into The Tokyo Residential JV on behalf of two funds of funds as well as one separate account it already advises. The $400 million vehicle, which includes debt, will target studio and one-bedroom flats in Tokyo.
“After the crisis we saw opportunities in the core Asia-Pacific markets, which repriced a lot more substantially than other markets,” notes Kang. “We have seen a lot of downward movement in capital values in the more mature markets like Japan and Australia.
“From our research views in 2010, we concluded that Australia and certain sectors in Japan could be bottoming out, so we felt it was a good entry point in the cycle.”
She suggests the March 11 earthquake and tsunami that struck Japan will, if anything, have lengthened the cycle and could introduce more buying opportunities. “From an investment point of view, [March 11] could have opened the window a bit wider to get better priced assets for a longer period of time.”
Asked whether Aberdeen would look at other club deal or JV opportunities in the real estate sector in other Asian countries, Kang said it would, on an ad hoc basis.
“In a market like China, for instance, because there is such strong investor demand for assets there, the closing risks for a fund are going to be lower, so perhaps it would be easier to go down the traditional funds route in China than in Japan, in today’s conditions.”
As at the end of last year, Aberdeen AM had $36 billion under management in property globally across segregated mandates and open-ended and closed-end funds, out of $287 billion in total assets.
GE Capital Real Estate has $73 billion in assets worldwide and a presence in 31 markets throughout North America, Europe and Asia-Pacific.