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EXCLUSIVE: Germany’s BVK in €700m Asia RE expansion

Germany’s biggest public pension fund manager has plotted separate accounts with pan-regional investment managers Alpha Investment Partners, CBRE Global Investment Partners and Arch Capital in a strategic move to more than double its real estate AUM in the region.

Bayerische Versorgungskammer (BVK), Germany’s biggest public pension fund manager, has instigated a strategy to more than double its exposure to private real estate investments in Asia, PERE can reveal.

According to sources familiar with its plans, the Bavarian institution, which is responsible for approximately €59 billion of investment capital on behalf of about 1.9 million pensions, has picked three Asian real estate investment managers with which it intends to award pan-regional separate accounts.

In total, about €700 million of equity is expected to be awarded in equal measures to Singapore-based Alpha Investment Partners, the fund management business of listed-developer Keppel Land, CBRE Global Investment Partners, the joint venture investment business of LA-property services firm CBRE, and Hong Kong-based private equity real estate firm Arch Capital.

Talks are ongoing between BVK and the three managers with terms and conditions being ironed out, however these are expected to conclude within a couple of months.

It is understood that BVK has requested a range of risk and return strategies from the three investors with Alpha and CBRE expected to generate more core-plus style returns from outlays and Arch Capital more opportunistic returns.

While Alpha and CBRE are no strangers to separate accounts with institutional investors, such an offering is new from Arch Capital which has traditionally invested via commingled real estate funds, although it has run side-car co-investment vehicles.

It is understood that these allocations, once invested, will more than double BVK’s exposure to private real estate in Asia as it currently has about €500 million in direct and indirect assets in the region, one PERE source said.

However, BVK does have a history of mandating private real estate investing strategies via separate accounts. For example, in 2014, it awarded a €500 million mandate to LaSalle Investment Management for a wide-reaching strategy. In 2013, it awarded a similar size mandate to CBRE Global Investors, CBRE’s main real estate investment management business. Invesco Real Estate and UBS Global Asset Management too have received mandates in the past.

The pension fund manager’s real estate funds investing is led by head Rainer Komenda.

The investments in Asia come at a particularly volatile time for Asian financial markets, particularly in mainland China where each of the three managers has invested capital, to varying extents. As such, the timing of the investment by BVK will be seen as something of a contrarian play at a time when little fundraising for pan-Asian private real estate investment strategies is happening.

Indeed, according to PERE’s Research & Analytics, $6.593 billion was raised for Asian strategies in the year to date, a far cry from peak years. To add further context, almost half that figure was raised by one firm, the logistics specialist developer-cum-fund manager Global Logistic Properties.

In terms of managers to have closed on equity for pan-Asia strategies, the list extends to Baring Private Equity Asia, CLSA Capital Partners, Pamfleet Group and SC Capital Partners. By contrast, more than $22 billion was raised for US strategies.

Neither BVK, nor any of the managers would comment.