The Carlyle Group has put a $500 million China-focused real estate separate account on hold amid a period of flux with its Asia real estate business, PERE has learned.
The Washington, DC-based private equity firm and the National Pension Service of Korea are understood to have agreed to form a $500 million core-plus separate account focused on China earlier this year, as a follow-on commitment to an earlier similar-sized account that was created in 2014 and is now fully invested.
The previous account is understood to have a current projected internal rate of return of 16 percent. However, a Carlyle spokesman said the firm has decided not to proceed with the new commitment for the time being.
The spokesman said leadership changes within Carlyle’s real estate team were the reason the $500 million NPS separate account “has hit a pause” at the moment.
Both Adam Metz, Carlyle’s head of international real estate, and Jason Lee, head of Asia real estate and a 22-year company veteran, left the firm in recent weeks. Carlyle will no longer have a head of Asian real estate, but instead has appointed Han Chen, a 14-year veteran of the firm, as its new head of China real estate.
The firm has officially repositioned its Asia real estate business as a China real estate business. Under the restructuring, the latter will report to Xiang-Dong ‘XD’ Yang, chairman of Carlyle Asia, who now will add it to his remit that also includes overseeing Carlyle’s Asia buyouts and Asia growth strategies.
Carlyle declined to comment on if and when the firm would proceed with its commitment with NPS, now that the Asia real estate team has restructured and essentially stabilized.
The refocus of the Asian real estate business on China was the reason for Metz and Lee’s departures, the spokesman said. Carlyle’s last pan-Asia fund, Carlyle Asia Real Estate Partners III, was closed in 2013 but had a China-heavy focus. Meanwhile, the firm has over the past few years eliminated its on-the-ground presence in its other Asia offices, including Tokyo and most recently, Hong Kong.
Metz joined Carlyle in 2014 and was based in Washington, DC. Under his direction, Carlyle executed and managed investments of approximately $2 billion of Asian real estate. He also was responsible for revamping Carlyle’s European real estate business, including hiring former Blackstone senior managing director Peter Stoll, as its new head of the region and launching its first European real estate fund in nearly a decade. Lee began working with Carlyle’s US real estate group in 1996 and was involved in the acquisition of more than $3 billion of real estate assets in the US through Carlyle Realty Partners I and II. In 2001, Lee launched Carlyle’s Asia real estate platform.
Carlyle had $18.3 billion, or 9.38 percent of its $195 billion in total assets under management, in real estate as of December 31, according to its latest earnings results.