CalPERS commits $530m to Singapore's ARA

The $238 billion pension system has contributed to two vehicles, sponsored by ARA Asset Management, which will target real estate investment opportunities in China and Asia.

The California Public Employees’ Retirement System (CalPERS) has contributed a total of $530 million to two real estate vehicles sponsored by Singapore-based real estate fund management firm ARA Asset Management.

CalPERS announced that it will invest $480 million in the ARA Long Term Hold Fund, a bespoke seperate account vehicle. In addition, the $238 billion state pension system also will invest $50 million in ARA’s pan-Asia commingled opportunity fund, Asia Dragon Fund II. 

ARA’s Long Term Hold Fund, also known as ARA China Investment Partners, will target investments in office buildings in central business districts and retail malls in densely populated suburbs of first- and second-tier cities in China and in Hong Kong. ARA also has invested in the vehicle, which now has initial committed capital of $500 million. 

ARA’s opportunistic Dragon Fund II is focussed on retail, office and residential property investment in the key cities of mainland China, as well as in Singapore, Hong Kong and Malaysia. During the first quarter, Dragon Fund II managed to raise $400 million of its ultimate $1 billion target. A first closing of $300 million for Dragon Fund II was completed late last year, $200 million of which came from the Teacher Retirement System of Texas. A final closing is expected before the end of this year. 

In its half-year earnings statement released 10 August, ARA chief executive John Lim said these commitments from CalPERS have helped the firm raise “close to $1 billion for its [current] private real estate funds. Although faced with headwinds arising from economic uncertainty, ARA remains resolute in sourcing investment opportunities for its real estate platforms in Asia, particularly in China, Hong Kong, Singapore and Malaysia. This is consistent with the group’s belief that regional real estate remains an attractive asset class as Asia’s sound fundamentals become more evident in the medium to long term.”

Ted Eliopoulos, senior investment officer for CalPERS’ real estate programme, said: “ARA is a disciplined investor with a strong bench of senior executives and capabilities in many aspects of real estate operations in Asia. The team has performed well for our fund over the years.”

Indeed, CalPERS is no stranger to ARA’s real estate funds. In 2007, the pension invested $500 million in a sidecar vehicle alongside a commitment to the firm’s debut effort, ARA Asia Dragon Fund. That prior investment earned CalPERS a 19.2 percent return for the full-year period ended 31 March 2012 and an annual 8.4 percent return over the last three years through 31 March 2012.