Baring Private Equity Asia Real Estate (BPE Asia Real Estate), the real estate investment division of Baring Private Equity Asia, one of Asia’s largest private equity firms, has made its biggest real estate investment to date.
The Hong Kong-based firm, which closed on $365 million for its first real estate fund in March this year, has underwritten $75 million of a $150 million investment in a large office development in Clark, an emerging business district in the Philippines.
BPE Asia Real Estate has teamed up with ADM Capital, a Hong Kong-based private equity firm, to lead a consortium of investors that will finance the construction of five offices comprising more than 1.5 million square feet of space in Global Gateway Logistics City, a 440 acre site situated in the Clark Freeport Zone north of Manila.
Ultimately, the site is expected to accommodate approximately 62.4 million square feet of offices, logistics, retail and hotel property.
The investment by BPE Asia Real Estate is the third made on behalf of its debut fund, BPE Asia Real Estate Fund, and its second in the Philippines. The previous outlay in the country was about $50 million for a 323,000 square foot office in Manila. The other deal was a $30 million investment in the mezzanine financing for a portfolio of mixed-use properties in Korea.
Mark Fogle, the head of BPE Asia Real Estate, said: “Members of our BPE Asia real estate team have been investing in the Philippines since the late 1990s. We have a high degree of conviction in the market and it has been rewarding for us over a period of time. We have invested both debt and equity in building and rejuvenating a number of office and retail buildings in Manila over the years, and are pleased to be taking the next step in providing funding to create grade A office buildings and related infrastructure in a rapidly developing area such as Clark, which we see emerging as the next business process outsourcing hub for the country.”
The firm is aiming to capitalize in the growth of the business process outsourcing market in the Philippines which has lately become something of a preferred jurisdiction by corporates looking to outsource various services on account of the country’s high fluency in English and competitive labor costs.
While Metro Manila and Cebu are currently the country’s largest and best recognized outsourcing hubs, Baring believes Clark will soon be competing as a third hub. Indeed, office rents in Clark are currently about 50 percent lower than those in Manila and its vacancy rate is estimated to be only 3 percent at present.
Fogle added: “The Philippines has been one of the strongest performing economies in Asia in recent years and we believe that the outlook for the future growth of the country is very favourable, driven by a trend of offshoring and outsourcing back office functions, particularly by multinational corporations seeking to reduce costs.”