Private equity giant Warburg Pincus’s $2.8 billion fundraising success for its first dedicated real estate fund demonstrated the industry’s growing demand for ‘new economy’ real estate assets. The highly competitive landscape for logistics assets coupled with the weakening demand for office and retail property has pushed investors into alternative properties and various forms of debt, according to a PwC report.
Jeffrey Perlman, managing director and head of Asia-Pacific real estate and Southeast Asia at Warburg Pincus, said the firm has seen a “once-in-generation change” in real estate where investors are looking to “rebalance their real estate portfolio by investing into new economy real estate assets.”
Indeed, the firm’s inaugural real estate vehicle, Warburg Pincus Asia Real Estate Fund, won the Capital Raise of the Year in Asia by taking close to half of the votes. The firm closed the fund on $2.8 billion, almost doubling its original target of $1.5 billion in less than 12 months of fundraising. With a focus on new economy real estate such as data centers, multifamily and logistics, the fund has received strong support from both existing and new investors.
PERE reported last year that Warburg Pincus hit the $1.5 billion fundraising mark in the first half of 2021 and decided to raise its target to accommodate robust investor demand. Other private equity real estate players are now crowding into new economy real estate assets – a trend evident in the new platforms and growing competition appearing in the Alternatives Investor of the Year category in Asia.
The winner of the category, Gaw Capital Partners, took home 35 percent of the vote – the success of actively building alternatives investment products. The Hong Kong-headquartered firm raised its first $430 million commingled growth equity fund, Gaw Growth Equity Fund I, which will invest in property technology companies and launch two data center platforms: one China-focused, the other pan-Asian.
Second in that category is China-focused private equity player CBC Group, with 27 percent of the vote. The firm launched a new Asia-Pacific healthcare platform, CBC Healthcare Infrastructure Platform, and a China-focused life sciences venture, CBC China Life Science Infrastructure Venture, with Dutch pension fund manager APG Asset Management. CLSIV held a first close of $500 million with a hard-cap of $1.5 billion of total equity commitments, demonstrating institutional investors’ strong demand for alternative assets.
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Singapore’s sovereign wealth fund GIC has also stepped up its game in the hunt for new economy assets. With a diversified real estate portfolio, it won the Institutional Investor of the Year award in Asia with 44 percent of the vote. The investor added $3.9 billion to build the global xScaleTM data center portfolio with digital infrastructure company Equinix, which includes six assets in Japan.
Besides ramping up its alternatives real estate portfolio, GIC has also been capturing emerging opportunities in traditional real estate classes amid market dislocation. Last year, it teamed up with Partners Group and Melbourne-based hospitality operator Salter Brothers to acquire a portfolio of 11 Travelodge hotels in Australia with a gross asset value of $457 million.
The big get bigger
Corralling 60 percent of the vote, ESR’s $5.2 billion acquisition of the $95 billion Singapore-headquartered real assets manager ARA Asset Management saw it win Deal of the Year in Asia.
The deal confirms the market consolidation taking place in the private equity real estate industry. The merger of the two has made ESR the largest real asset manager in Asia-Pacific and the third-largest listed real estate investment manager globally, with over $140 billion in real estate assets under management.
The transaction also brings ESR together with fellow logistics specialist LOGOS, which was majority-owned by ARA, creating a combined logistics and data center portfolio of $59 billion. The deal follows ARA’s purchase of logistics specialist LOGOS Property Group in 2020.
As the leader behind the Deal of the Year, Perlman decisively won the Industry Figure of the Year award this year, with 69 percent of the vote. The Warburg Pincus executive spearheaded his firm’s team to create and build a real estate logistics business that became the ESR Group today.
He also led the firm’s fundraising effort in raising its first $2.8 billion real estate fund in the region. All of this has also helped make Warburg Pincus the Firm of the Year in Asia.
Apart from the landmark M&A activities, market consolidation can also be seen as more capital continues to go to established real estate players at a time when travel restrictions have made the building of new relationships more difficult. Last year’s winner and this year’s runner up in the Firm of the Year category, GLP established six new strategies in 2021 across China and Japan, including the initial public offering of China’s first logistics C-REIT. It also reached a $1.75 billion first close of its China logistics development fund, GLP China Logistics Fund III, and raised $2.75 billion in the first close of the largest private real estate fund in Japan, GLP Japan Development Partners IV.
This year’s results reflect the desire of global investors to diversify their real estate portfolios across multiple assets and adjust their risk and return profiles. Meanwhile, the incorporation of ESG into their investments has also been front of mind. GLP was at the forefront of this drive, picking up 63 percent of the vote to be named the region’s ESG Firm of the Year.