Aetos Capital back for $1bn for fifth fund

The Asia-focused private equity real estate firm is back in capital raising mode for the fifth in its series of pan-Asia opportunity funds. The launch comes eight years after Aetos raised the region’s largest fund.

Aetos Capital Asia, a private equity real estate firm once behind the largest pan-Asia real estate opportunity fund, is back in fundraising mode, PERE can reveal.

The firm founded in 2002 by chief executive officer Scott Kelley started earlier this month on its quest to raise up to $1 billion for the fifth in its series opportunity funds, Aetos Capital Asia V.

The firm expects to use the capital for investments in Japan, a market that has traditionally been its principal focus, but also elsewhere in Asia.

If successful in meeting its capital raising target it would represent something of a turnaround for a business that raised the majority of its equity in the lead-up to the global financial crisis and was, alongside a number of its peers, caught by the resultant downturn in property values that ensued as a result.

After generating strong returns for Aetos Capital Asia I, its debut opportunity fund which closed in 2003, Aetos went on to haul $2.2 billion for its second in the series in 2005. That vehicle was the region’s largest pan-Asia opportunity fund at the time but its investments struggled and the firm faced a battle to return equity to its investors. Its effort to raise a similar amount for a third vehicle was stifled amid dire capital raising conditions generally as many investors turned their back on the industry.

The firm managed to raise $250 million to seed a fourth vehicle from China Investment Corporation, in 2010. Aetos originally targeted $1 billion for that fund but its offering came before many investors were willing to re-engage with the industry and the vehicle ultimately became more akin to a separate account for the Chinese sovereign wealth fund.

Now, with equity markets demonstrating a greater appetite for opportunistic real estate, the firm is back in the market for $1 billion for Aetos Capital Asia V. To date, no placement agent has been appointed to assist in its fundraising.

The firm declined to comment on its capital raising plans, however Kelley was a speaker at PERE’s Forum: Japan conference last week.  On stage he said the firm was confident that Japanese Prime Minister Shinzo Abe’s economic reforms would make the country’s real estate a more attractive investment proposition. He also counted Japan’s low interest rates and Tokyo’s low rents and high cap rates as positive indicators for making investments today and told delegates: “Tokyo is cheap on a historical basis, even just looking at the beta. It is more attractive than most western markets.”

He said his firm was looking at the US housing market as one driving force for improving market conditions in Japan. “We rely on the US consumer [in Japan] and that is not going to come back until the US housing market hits bottom. We’re starting to see signs of that.”

PERE ran a Blueprint profile interview with Kelley in 2010. To read it, click here.