Asia Pacific-focused private real estate funds disposed 310 assets for $25.5 billion in 2015, according to a report from global property consultancy CBRE.
Fund managers were most prolific sellers in Japan, with the country accounting for 51 percent of the total assets sold via funds. Australia came a distant second with 24 percent of fund dispositions followed by China at 9 percent. A bulk of the assets at 59 percent comprised of office properties while retail was 24 percent of the total.
The fund expiry report released at the PERE Asia summit in Hong Kong today follows the ‘Great Wave of Fund Expiration’ white paper published by CBRE in late 2014. That paper predicted as many as 50 funds, valued at around $40 billion in assets, are slated to reach their termination period by end 2016.
The majority of these funds, raised pre-global financial crisis with opportunistic investing strategies, are now nearing their maturity period and have been exiting investments majorly in Australia, Japan and China over the last two years.
The total fund dispositions in 2015 were estimated to be 37 percent higher than the five-year average of $18.7 billion.
Nonetheless, as many as 430 assets are still left to be exited from Asian funds.
Around 33 percent of these remaining assets are retail and hospitality properties in lower tier Chinese cities, sectors that have been receiving weak investor interest due to poor market fundamentals and a slowing Chinese economy.
Moreover, if the yuan is devalued any further the report predicts a further fall in valuations and returns from the assets.
Japan still has around 19 percent of the total left over assets, mainly in the office and retail sector. While high liquidity and valuations, especially in the wake of the adoption of negative interest rates, should make it easier to dispose left over assets, a weaker Japanese currency could negate some of the positive effects.
Singapore is another market expected to struggle in 2016 due to the US interest rate hike and its impact on investor underwriting, leaving the future of 15 percent of the core commercial assets lined up for sale in jeopardy.
Given these subdued conditions, the property consultancy has predicted as many as 49 percent of the funds set to expire would consider extending the fund term.