US fund house BlackRock has acquired private equity real estate firm MGPA, giving the firm its first exposure to the private Asia-Pacific property market and doubling its global RE assets to $25 billion.
“This is the first time we will actually manage [private real estate] assets in Asia,” says Mark McCombe, BlackRock’s Asia-Pacific chairman, noting that opportunities due to economic growth and demographic shifts were too big to ignore. “Real estate is a long-term asset class, and for a firm like BlackRock, we need to have real estate capability in the Asia-Pacific region.”
Prior to the acquisition, there was no overlap between the two firms' assets, McCombe tells AsianInvestor. BlackRock’s main presence is in the US and the UK, while MGPA is invested predominantly across Europe and Asia-Pacific – making the acquisition an obvious solution.
“It’s a marriage made in heaven,” says MGPA executive chairman Jim Quille.
And while BlackRock launched a global property securities investment platform last year and hired Alastair Gillespie as chief investment officer of Asia-Pacific real estate securities in April this year, Gillespie’s Reits division will be run separately from MGPA.
“[Gillespie] was hired specifically to look after the public markets and manage the Reits business,” McCombe says. “This [acquisition] now gives [BlackRock] a lateral view across real estate.”
He declined to give details about personnel changes, but says he does not expect any immediate adjustments.
This acquisition undoubtedly gives BlackRock the real estate expertise it’s been seeking for a number of years, and quickly. Sources estimate it would have taken the firm at least five years to set up its own internal team.
MGPA has an impressive history of investing in Asia-Pacific real estate. It raised $3.9 billion for its MGPA Asia Fund III in 2008, and more recently €85 million ($109 million) for an Asian property fund targeting German institutional investors.
The manager recently closed its MGPA Asia Fund III and is already planning a fourth round of fundraising later this year, Quille tells AsianInvestor. He declined to give more details.
Both firms stand to benefit from an investor standpoint as well. BlackRock has “relationships with almost every institution globally” and deep connections in Asia, notes Quille, while MGPA’s links with Australian supranational funds and institutions are quite strong.
“We’re bringing these investor pools together. Between [BlackRock and MGPA], we’ve got most of the world covered,” he says.
Real estate has typically garnered interest from institutions such as pensions and sovereign wealth funds, although McCombe notes an increasing number of family offices, private banks and insurance companies eyeing property opportunities in Asia.
“[As] we’re living in such a low-yield environment, when fixed income doesn’t deliver returns and equity markets have been underwhelming, we are definitely seeing...a lot of institutions putting money into [real estate],” McCombe says.
MGPA will be fully integrated into BlackRock’s real estate platform, but McCombe says there will be “no change in style” in how the funds are managed.
With $12 billion in AUM as of March 31, MGPA has Asia-Pacific offices in Sydney, Beijing, Hong Kong, Shanghai, Tokyo, Kuala Lumpur and Singapore.