EXCLUSIVE: Baring Private Equity closes maiden RE fund

The recently assembled real estate platform of one of Asia’s largest private equity businesses has held a final closing for its first dedicated real estate fund.

BPE Asia Real Estate, the real estate business of Baring Private Equity Asia, one of Asia’s largest private equity firms, has brought the fundraising for its maiden real estate fund to a close.

PERE can reveal the firm brought capital raising for its BPE Asia Real Estate Fund to a close before its fundraising period was scheduled to conclude after raising approximately $365 million for the vehicle.

Further, the firm has already deployed about $50 million of the equity raised on two transactions, for an office building in the Philippines and the mezzanine debt behind a quartet of offices, retail and hotel assets in Korea.

The capital raising comes nigh on three years after the firm hired ex-AIG Real Estate and RREEF senior executive Mark Fogle to grow and lead a private real estate investment business that would assume a pan-regional, higher risk and return investing strategy.

Since then, the firm has grown out a team that now includes other high profile executives including ex-China head of Pramerica Real Estate Investors, Charles Lam, and Invesco’s former head of development in Asia, Malcom Lai. Both of them worked with Fogle for a decade while at AIG.

The firm raised capital from an array of institutional investors including US pension funds and corporates, European private wealth managers as well as a Hong Kong family office and a Middle Eastern sovereign wealth fund.

Fogle said how, despite being a first time fund, investors were attracted to the experience set of the team. He said: “We have two major things going for us. One, our entire team comes from the credit side of the business. Of the 100-plus deals that we’ve completed in the past two decades, 60-odd were debt. That makes a difference as we approach deals from a lender’s perspective of focusing on the downside.”

“The second thing is we have huge development expertise because we’ve built a lot of buildings across Asia. Whether we build or buy, we understand the quality of a property, and what you get when you pay for something including what’s behind the walls or in the foundations.”

The fund has a three year investment period within a fund life of up to eight years to put the capital to work.

The firm already has deployed $25 million to acquire a 323,000 square foot office in Manila, the Philippines, called ACCRAlaw Tower, which will now be subject to a value-add strategy involving significant tenant repositioning. Another $30 million has been deployed into the mezzanine debt behind the acquisition of portfolio of mixed-use properties in Korea. These assets also are subject to a turnaround strategy, but were acquired by the borrower at 60 percent of replacement cost.

The platform is expected to use the remaining proceeds in the fund to invest in another eight to 10 investments across select Asia markets from which it hopes to generate an IRR of more than 20 percent.

The firm’s first real estate fund raising comes one month after its parent closed on its biggest private equity fund, Baring Asia VI, which collected $4 billion but was said to have been oversubscribed by as much as another $2 billion.

Baring PE manages about $9 billion of assets, employs more than 110 staff and operates from seven offices.