ARA Asset Management has raised $1.63 billion for its flagship private real estate fund, the ARA Asia Dragon Fund. Including leverage, the fund has a potential real estate investment capacity of more than $5 billion.

The monies were raised in three tranches. The recent third and final closing generated $121.4 million, while the first closing in September last year raised $716 million plus $500 million from California Public EmployeesÆ Retirement System (Calpers). The second closing in December raised $295.8 million.

ARA Fund Management (Asia Dragon) Limited, a wholly-owned subsidiary of ARA, manages the fund.

The fund attracted a broad range of investors including public pension funds, foundations and other global institutional investors seeking to invest in a diversified portfolio of real estate investments in Asia. The commitment from Calpers, the biggest pension fund in the US, is part of its $1 billion allotment for investments in Asian real estate, raising its allocation to the regionÆs property sector by 50% to $3 billion. Calpers manages more than $250 billion in assets worldwide including around $34 billion in property.

ôThis is by far the largest private fund we have raised to date and the response from investors has far surpassed our initial expectations,ö says Singapore-based ARA Group CEO John Lim.

The fund has a mandate to invest across Asia with a primary focus on the main cities in China, Singapore, Hong Kong, Malaysia and a secondary focus in key cities in Taiwan, Thailand, Vietnam and other rapidly growing economies in the region.

The fund will invest mainly in residential and commercial property but will also consider investment in other asset classes, such as industrial property where it can offer good risk adjusted returns. It will invest in both completed and development projects. As an opportunistic real estate fund, it targets a minimum internal rate of return (IRR) of 20%.

Making use of ARAÆs experience and knowledge of the real estate market in Asia, the fund seeks to make strategic and opportunistic investments in real estate and real estate-related assets within its mandate with the goal of optimising total return from a combination of income and capital appreciation.

The fund has received and reviewed more than 150 deals and has a pipeline of several billion US dollars, with the majority from China and Singapore. To date, the fund has invested in real estate with a gross asset value in excess of $800 million and is actively working on deals in Hong Kong, China, Singapore, Malaysia, Vietnam and Taiwan.

ôWe are currently seeing very interesting investment opportunities in the region with more realistic asking prices from asset owners in the wake of the tighter global credit environment and concerns over a US slowdown affecting global growth,ö says Anthony Ang, Singapore-based fund director of the ARA Asia Dragon Fund. ôNotwithstanding the current weaker market sentiment, we are cautiously optimistic of prospects for the region and remain positive on the long-term growth outlook for Asia.ö

Looking ahead, ARA plans to grow both its Reit and private funds business.

An affiliate of the Hong Kong-based Cheung Kong Group, ARA is a Singapore-based real estate fund management company with total assets under management of more than $7 billion as of March 2008. ARAÆs business is focused on real estate investment trust (Reit) management, private real estate fund management, specialist equity fund management, and corporate finance advisory services.

ARA is one of the largest Reit managers in Asia ex-Japan and currently manages four Reits listed in three countries namely: Fortune Reit and Suntec Reit listed in Singapore; Prosperity Reit listed in Hong Kong; and AmFIRST Reit listed in Malaysia. The firm manages several closed-end private real estate funds too. It currently manages an open-ended private fund investing in Reits and listed infrastructure and utilities trusts in the Asia-Pacific region. It also has an in-house advisory arm providing corporate finance advisory services to the group.