Known for its significant strategic evolution over the years, CBRE Investment Management’s flagship value-add fund series in Asia is now expanding into non-traditional property types with its latest vehicle, Asia Value Partners VI.
While CBRE IM will continue to deploy at least 80 percent of AVP VI’s capital into logistics, it plans to invest the remaining capital in the region’s data centers for the first time. Exceeding its initial target of $1.2 billion, AVP VI closed on $1.74 billion in October, with commitments from 13 institutional investors.
“Any non-logistics deals that we do will probably be in the data center space and we are seeing opportunities in Japan and Korea,” said Adrian Baker, chief investment officer for CBRE IM’s APAC direct real estate strategies and president of CBRE IM’s APAC real estate division.
“Meanwhile, I don’t think we will invest in offices and multifamily like we did in the previous funds, with a view that the office sector will continue to be very challenging.”
Although CBRE IM has invested selectively in offices and multifamily in Asia through the fund series, logistics has become a key focus since the series’ third fund. It is understood the firm invested in a multifamily deal in AVP IV and two office deals in AVP V.
The firm’s Asia value-add series has gone through significant evolution in its history – its planned foray into data centers in AVP VI represents another strategic shift from its predecessors.
“Although the target return for the fund series has remained in the same value-add range, other aspects of its strategy and execution have gone through significant evolution,” said Baker.
Indeed, the first vehicle in the series, Asia Alpha Plus, was launched as a pan-Asia diversified fund of funds in 2009, under the indirect business of CBRE Investment Management. AAP II followed a similar investment strategy.
AAP III was a key turning point, when the fund series shifted investment focus towards logistics, with around 70 percent of the vehicle invested in the sector, primarily executed through joint ventures and co-investments with selected operating partners.
At the time, Baker believed the logistics sector was undergoing a unique growth phase on the back of e-commerce and other structural drivers that would change its position as a real estate asset class for institutional investors. “Given the relatively nascent stage of the asset class then, with mostly old, outdated stock, as well as its tightly held nature by developers, CBRE IM determined that it needed to migrate towards being a true logistics operator with in-house operating capabilities,” he explained.
Seeing the success of the first three funds and the opportunities it detected in the Asian logistics market, the firm rebranded the fund series and adopted a direct investment strategy for the next fund, Asia Value Partners IV, which was launched in 2016. With AVP IV, CBRE also further intensified its specialization in the sector, with more than 80 percent of the fund invested in logistics.
The rebrand of the series was well supported by investors – the $1 billion AVP IV was four times the size of its predecessor AAP III. Since then, follow-on funds AVP V and AVP VI have continued with a similar investment strategy.
“The boom in the logistics sector has been further accelerated by covid-19, and the competition has certainly increased this year,” said Baker. He believes logistics and data centers will remain key strategies for the fund series – the firm has not lowered the return target for AVP VI.