CBRE: $45bn of Asia RE funds to expire by 2016

Of the $90 billion raised for Asia-Pacific closed-ended funds just before the crisis, half will have to assess exit, extension or liquidation options in the next two years, according to the world’s biggest property brokerage.

Approximately $45 billion of closed-ended private equity real estate funds in the Asia-Pacific region raised between 2006 and 2008 are expected to expire between now and 2016, according to research provided by real estate services firm CBRE.

More than 150 funds collected about $90 billion for Asia-Pacific real estate during the pre-global financial crisis boom, about 60 percent of which were opportunistic in strategy. As fund lives draw to a close, most of the firms behind these funds are already assessing options for extensions, mergers and restructures.

However, executive director at CBRE’s capital advisory unit, Nick Crockett, told PERE that the firm doesn’t expect any fire sales in the region, even with all the expiries on the horizon. 

Over the past year, market sentiment has become more positive and has generated enough competition for assets for prices to rise, he said. And, with an anticipated increase in institutional capital coming from Asian institutions on the cards, many of these funds should have multiple sale options when the time comes to exit from their assets.

“Investors [in funds] have been dealing with these issues since the GFC,” Crockett said. “Any restless behaviour occurred a few years ago when fund managers were dislodged or funds taken over by new managers.”

In this upcoming wave, Crockett expected investors to be more patient, especially if assets are generating a strong income yield.

Nevertheless, there was still approximately $21 billion of disposals by property funds in Asia Pacific last year alone, and Crockett said the figure for 2014 could be even higher. “It will be larger especially if we count the restructuring or recapitalisation of funds that could occur this year,” he added.

Many sales programs have already been underway for one to two years. Although the private equity real estate funds that have been raised over the past two years are also expected to “soak up a huge amount” of the stock expected to come to market, Crockett said there will probably be some managers struggling to sell their assets. “We expect to see these managers to sell more whole portfolios that combine good quality but also secondary assets as a means of seeking a liquidity exit,” he explained.