MGPA has held a first close on an Asia property fund specifically targeting German institutional investors.

The real estate private equity firm’s MGPA Asien Spezialfonds has so far received a total of €85 million ($109 million) from three German institutions.

A second close for the fund is expected by year-end, according to John Saunders, Asia chief executive of MGPA. The vehicle has a target size of €500 million.

The eurozone woes have had a positive effect on fundraising, says Saunders, with interest stemming from German institutions that “are looking for non euro-denominated [destinations] to put their money".

As a spezialfonds (special fund) it is regulated under Germany’s strict investment laws and is exclusively dedicated to institutional investors. However, it can be offered to European investors outside of Germany provided they are comfortable with the product’s German-language fund reporting.

The MGPA vehicle, which targets an internal rate of return of 10-12%, is focused on core-plus property investments in established markets such as Japan, Australia, Hong Kong, Singapore and Malaysia.  

It aims to derive a steady revenue stream through rental and management income, with a particular focus on office and retail properties. In terms of markets, Japan and Australia present attractive opportunities due to their high yield potential, notes Saunders.

MGPA, which manages about $10 billion in assets in Asia and Europe, also runs the Asia Fund III, which closed in 2008 at $3.89 billion. It has a different focus from the Asien Spezialfonds product, targeting opportunistic property deals in the region.

Fund III is continuing to invest in properties in the region, says Saunders, with attractive pricing being offered by sellers.