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AXA REIM targets China for $500m Asia fund debut

Contrary to reports of freezing its investment programme for Asia, AXA REIM has been busy readying itself to launch its first Asian fund for the first half of 2010.

AXA Real Estate Investment Managers is targeting an equity haul of up to $500 million for its first Asian real estate opportunity fund to be launched in the first half of 2010.

Contrary to reports that the firm was putting its investment activities in the region on hold, AXA REIM is now preparing the fund which would invest in middle to middle-upper tier city residential schemes in China. The firm is expected to confirm the launch later this month.

AXA REIM, which hired Pacific Star senior vice president Frank Khoo to lead its charge on the continent last year, is aiming to raise between $400 million and $500 million of equity for the vehicle. The firm is expected to hold a first close in the second half of next year. It hopes to achieve a return of between 18 percent and 22 percent.

Khoo told PERE the fund would be jointly managed with a yet-to-be named Chinese investment manager. He also said that the partners would seek tie-ups with local developers over making individual project investments.

Khoo said: “We see that certain things have not changed in China even in the current economic crisis. There is still such a big urbanisation opportunity.”

“We like the middle to middle-upper class space because of the economics driving it,” he said. Khoo listed China’s young and growing population, growing incomes, fewer current users of mortgages and the attractiveness of investing in a sector that is “self financing” and “self liquidating” as key drivers for the fund.

He added that unlike investing in affordable housing, as many other investors were doing, the middle class realm allowed for more innovative designs to be incorporated in developments. “In terms of the lower end of the spectrum, I don’t think we can add value there, it is all down to price,” he said.