Aetos revises Asia fund offering – Exclusive

Aetos Capital Real Estate, the Asia-focused private equity real estate firm, has revised its fund strategy by replacing an opportunity fund with a value-add fund.

PERE has learned that the firm has cancelled the capital raising plans for its fifth pan-Asia opportunistic real estate fund, Aetos Capital Asia V that was originally launched in September 2013 with a $1 billion target. In its place, Aetos brought to the market a lower risk and return vehicle around two months back.

A target of between $500 million to $750 million is understood to have been set for the new pan-Asia value-add vehicle, the firm’s first non-opportunistic fund in the region. Investors in the fund should expect mid-teens IRRs, it is understood.

Scott Kelley, founder and chief executive officer of Aetos Capital Real Estate, is the key man for the fund, one source familiar with the situation said.

In terms of target investment markets the firm’s strategy remains the same.

Approximately 85 percent of the fund would be deployed in Japan, which has traditionally been Aetos’ principal focus market, while the remainder could be invested in South Korea and Hong Kong.

The firm has also scaled down its Asia operations in conjunction with a smaller asset base following the sale of a large Japanese real estate business called Simplex Investment Advisors (SIA) Group to the property developer Hulic for ¥155 billion ($1.54 billion; €1.37 billion) in October last year.

Indeed, with around $500 million in assets under management today, the firm’s headcount has been reduced to approximately 15 staff from more than 100 staff prior to the Simplex sale.

Founded in 2002, Aetos Capital Real Estate raised its biggest investment vehicles prior to the global financial crisis, including $2.2 billion in equity for Aetos Capital Asia II in 2005, which became the largest pan-Asia opportunity fund raised at the time.

The fourth fund in the opportunistic series was launched in 2010 with a $1 billion target. However, due to challenging capital raising conditions in the aftermath of the crisis, the firm decided to convert the fund’s initial $250 million, capital from Chinese sovereign wealth fund China Investment Corporation, into a separate account vehicle.