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EXCLUSIVE: PAG set for first close on core Asia fund

The Hong Kong-based private equity and real estate investment management firm is expected to have raised $400 million in the first close of its first core strategy fund.  

PAG, the investment management firm that merged with the Japan-focused private equity real estate firm Secured Capital in 2011, is set to announce a $400 million first close of its debut core strategy Asia vehicle, PERE can reveal. PAG Real Estate Partners was launched in March last year with a fundraising target of $1 billion.

PAG declined to comment on fundraising. PERE, however, understands that the firm is eyeing commitments from 10 to 15 investors to raise the target amount. A couple more closings after the first close are expected.

The capital raised will be invested in core assets with strong cash flow across nine gateway cities in Asia. The firm is expected to focus on markets where it has already demonstrated its capabilities, namely Japan, China and Australia. No investments have been made so far, however, it is understood.

PAG, previously known as Pacific Alliance Group, is believed to be expecting net returns of 10 percent to 14 percent from the vehicle. 

In March last year, PERE obtained a copy of the marketing teaser outlining the investment strategy for the fund. According to the document, the firm is likely to hold investments for an average of seven years within the fund’s life span of between 10 years and 12 years. The firm is also said to be targeting moderate leverage of 50 percent to 60 percent and will include a sponsor commitment of up to $20 million, or 2 percent of the total fund.

Park Hill Real Estate is assisting the firm in the capital raising efforts.

Though it has built a steady track record investing in real estate via core-like strategies, PAG is better known for investing higher up the risk and return spectrum and specifically through an opportunity fund series inherited via its takeover of Secured Capital.

For that series, PAG is believed to be in the early stages of determining the details of its next opportunistic real estate vehicle, although it is not expected to be launched much before the end of the year.

In November 2013, Secured Capital hauled $1.5 billion for its Secured Capital Real Estate Partners (SCREP) V opportunistic fund, raising 50 percent more than the original fundraising target. The capital raised was to be invested in distress and default situations in Japan, and in addition, a 15 percent allocation was also made to China.

Around 60 percent to 70 percent of the fund is said to have been deployed so far.