Arch Capital Management, the Hong Kong-based private equity real estate firm, has increased its capital haul for its second Asia opportunity fund to $306.8 million after holding a second equity closing.
Arch, co-founded in 2007 by ex-Citigroup and AIG Real Estate executive Richard Yue, has raised $84 million from two investors for its ARCH Capital-TRG Asian Partners LP fund.
One of the investors was from the Middle East and the other was the pension fund of a large US institution. In addition to those fresh capital commitments, certain investors from the fund’s first closing of $220 million held in July, have increased their commitments.
Yue said: “We’re pleased given the market is fairly difficult at the moment especially given what is happening in Europe.”
Yue said a final closing is expected during the first quarter of 2012 and that Arch might appoint a placement agent to assist it in reaching its capital raising target of up to $500 million. He said: “We’ve been approached by a number of firms but we haven’t decided whether we want to go do that. We haven’t used one for the first and second closings but if we want to wrap up fundraising it might save us a lot of time.”
Nonetheless, Arch has already started to put some of the capital raised to work in China, which is expected to figure prominently in its investment strategy. The ARCH Capital-TRG Asian Partners LP fund can, however, be used for investments also in Taiwan, Macau, Hong Kong, Singapore, Thailand, The Philippines, and Malaysia, Indonesia and Vietnam subject to Advisory Committee approval.
“A lot of our efforts are focused on China as liquidity is very tight there right now,” Yue said.
Arch has been one of few firms to have held successful capital closings for Asia-focused real estate opportunity funds in 2011. According to PERE’s Capital Watch, just $3.25 billion was raised for such funds by mid-November.
While certain others are expected to hold closings before the year end, the total capital raised for high return real estate funds in Asia is not expected to be high. A similar amount was raised in Europe, however US and global funds accounted for the vast majority of the $36.2 billion recorded by Capital Watch to mid-November.
The ARCH Capital-TRG Asian Partners LP fund follows Arch’s debut fund, Arch Capital Asian Partners LP, which closed on $330 million in 2007 after the firm was founded 50:50 by Yue and Philippines-based Ayala Corporation. In March, 2011 Ayala entered into a share swap with New York-based emerging markets firm The Rohatyn Group (TRG) in which it exchanged its shareholding in ARCH Capital for an increased stake in TRG. Ayala continues to be a strong supporter and significant investor in the two ARCH funds, providing seed capital totaling $125 million.