Hong Kong-based private equity real estate firm Arch Capital has raised almost half the equity it intends to capture for its third pan-Asia opportunity fund, PERE has learned.
The firm, led by former AIG Real Estate executive Richard Yue and ex-Ayala Corporation executive Charles Cosgrove, has raised $237.5 million, predominantly from existing investors, for its Arch Capital-TRG Asian Partners III fund, as it had originally planned. Following on from this closing, the fund is expected to be marketed to investors new to the firm. To that end, a second closing is anticipated to happen sometime in the fall. A third closing is slated for year-end.
The equity closing comes after Arch has deployed all the capital from its second fund, which was closed in late 2012 on $387 million. The firm already has made four exits from that fund from which it is understood to have generated realized IRRs of more than 30 percent.
While Arch has a pan-Asia remit, its strategy has majored on investing in real estate via distressed situations and using preferred equity in mainland China.
Among other markets in the strategy are Thailand, Hong Kong and Singapore but while the latter two of those markets are expected to figure among the investments of Fund III, Thailand is not on account of its currently unstable political regime. Indeed, although up to 15 percent of the fund’s equity may be invested in Thai real estate, it is not expected that any capital from the vehicle will be deployed while the military remains in government.
In holding a first closing, Arch has become one of a handful of Asian GPs to have raised capital for private fund strategies in the region following a particularly quiet first generally. According to PERE’s Research & Analytics division, just $1.7 billion was raised by Asian GPs in the quarter, compared to $5.3 billion raised in the fourth quarter of 2013. But Arch’s first closing follows closely a $155 million first closing by Hong Kong neighbours Pamfleet Group for its second fund, and CLSA, which raised $540 million for its third.
Arch Capital is owned 50:50 between its management and The Rohatyn Group, an alternative assets investment management firm based in New York.
The firm declined to comment.