CLSA holds $400m first close on third fund

Hong Kong-based fund manager CLSA Capital Partners has held a first close on $385 million for its third Asia-focused real estate fund just two months after the official launch, PERE can reveal, once again demonstrating the bifurcated real estate fundraising market in Asia.

CLSA declined to comment on fundraising when approached, but the firm is understood to have started marketing Fudo Capital III to new and existing investors in January with a target of $850 million and a hard cap of $1 billion, the firm’s largest target to date. Although the first close was technically on $385 million, according to an SEC filing, commitments closed since then have brought the capital of the fund to more than $400 million.

Past investors in the Fudo fund series are understood to include mid- to large-sized pensions and endowments based in the US and a few in Europe, and it is also understood that Fund III already has some larger commitments. CLSA’s investors typically are understood to already have some exposure to Asia through various strategies, such as public markets.

CLSA is expected to continue to follow the boutique value-added strategy of its predecessor funds, targeting an overall IRR of approximately 20 percent by acquiring lower-grade office, retail and residential assets in need of repair and upgrading them. The fund is not expected to engage in any development projects.

CLSA’s real estate investments have tended to be smaller, with equity ticket sizes between $25 million and $75 million, and the firm is expected to keep to that investment size for this new fund. The firm also is expected to offer some co-investment opportunities to its investors. According to the filing, Greenhill & Co. is acting as the placement agent for Fund III.

In July, Chinese conglomerate CITIC Securities announced it had bought the 80.1 percent stake in CLSA’s parent company that it did not already own from French retail banking group Crédit Agricole CIB for $842 million, making CLSA a wholly-owned subsidiary of CITIC. However, the corporate change is understood to have little to no impact on the everyday operations of CLSA Capital Partners specifically, which has carried on with business as usual. It also is understood that CLSA was waiting for the buyout to firmly settle before launching its third fund.

CLSA’s first two funds both raised more than their capital targets. According to PERE’s Research and Analytics division, Fudo Capital I hauled $430 million in 2005 versus a $350 million target, and Fudo Capital II raised $815 million in 2009 versus its $750 million target, despite the tough fundraising environment following the global financial crisis.