UK-based property specialist LaSalle Investment Management is targeting a first close of $300 million to $400 million in October and a final close of $750 million for its fifth Asia Opportunity fund. It has set a hard cap of $1 billion.
“Capital-raising has been consistent with previous funds, with an even mix of US, Europe and Middle East investors,” Mark Gabbay, Asia-Pacific chief executive at LaSalle IM, told AsianInvestor. Asian Investors have historically made up less than 10% of invested capital.
The firm’s previous Asia opportunity fund, LAOF IV, closed at $485 million in July 2014, which suggests global investors are getting more comfortable with the risk-return in the region, Gabbay noted.
However, the fifth fund will fall well short of the $3 billion raised by LAOF III, which closed at $3 billion in 2007. LAOF II raised $1 billion in 2005, and LAOF $240 million in 2002.
Japan, Australia, China, Korea, Singapore are the primary focus for LAOF V, Gabbay said, and LaSalle IM’s Asia opportunity strategies have historically focused on office, industrial, retail, hotel and residential, in that order.
Asked what he saw as the least appealing assets in Asia, Gabbay cited tier 3 Chinese cities. But historically LaSalle has not invested in those locations, he said, because demand is not sufficient for the level of supply, because of overbuilding for certain property types, particularly retail and residential. Certainly, China’s property sector is reportedly showing signs of cooling off, with prices rises slowing.
The new fund will follow the same risk profile as its predecessor, seeking mispriced assets, with opportunities to add value via repositioning and redevelopment. It will take a “limited amount” of development risk and is expected to focus on the logistics markets in China and Korea, according to LaSalle IM.
LAOF V aims to take advantage of several growing trends in the Asian market including: solid growth in rents paired with potential capital-value appreciation in the near term; varying market cycles that allow investors to diversify risk and return over the holding period; and rising demand for core assets.
The strategy has already made its first acquisition on August 5 – of a 76,653-square-metre retail asset in Japan, the Kishiwada Cancan Bayside Mall, between Osaka city centre and Kansai International Airport. LaSalle intends to reposition the asset after it recently lost its anchor tenant and occupancy fell to 50%.
Gabbay has no plans to add more staff to help invest LAOF V: “We currently have 48 people dedicated to the strategy, which is sufficient to cover the markets we are investing in."
Other property fund managers are also increasing their focus on Asia from both an investment and client-acquisition perspective. For instance, UK-based Savills Investment Management is setting up an office in Shanghai, its first in China.