The Los Angeles City Employees’ Retirement System has earmarked $25 million for Heitman’s first Asia-focused fund, according to the pension system’s Tuesday meeting minutes.
Chicago-based Heitman launched Heitman Asia-Pacific Property Investors with a $250 million target, a $350 million hard-cap and a 1 percent GP co-invest, according to meeting materials compiled by Townsend Group, LACERS’ real estate consultant. Heitman is planning to hold a first close for the fund this month on $140 million.
The firm plans to use capital from the US dollar-denominated fund to invest in core and developed markets including Australia, Japan, Hong Kong and Singapore. It will be invested in all property types, including specialty sectors such as self-storage, medical office and student housing. The firm had seven investments in its pipeline as of May, with a total value of $735 million, including projects ranging from self-storage in Singapore to retail in Australia.
The firm is targeting a net internal rate of return of 11-13 percent, using up to 55 percent leverage.
Other investors in HAPI include Ohio Police & Fire Pension Fund, which allocated $50 million to the vehicle in May, PERE previously reported.
Heitman’s Asia operations are based in Hong Kong, with additional offices in Seoul and Tokyo. The firm has about $1 billion of assets under management in Australia, Japan, Malaysia and Singapore through separate accounts and joint ventures.
Its first real estate investments in the region were through a $266 million joint venture with the listed property developer Abacus Property Group in 2011. The partners bought real estate assets in Australia, with Heitman providing 75 percent of the equity and Abacus the remaining share. The first asset acquired under the joint venture was a commercial office building in Sydney for $35.6 million.
LACERS has worked with Heitman previously. The pension system committed $15 million to Heitman Value Partners, a 2004-vintage fund that generated a 4.9 percent net IRR, according to board documents.
LACERS’ private real estate holdings comprised 5.4 percent of its overall $15.3 billion in assets as of March 31, according to the pension’s website. The asset class returned 7.7 percent in the year ending March 31, while LACERS’ overall portfolio returned 10.5 percent in the same period.
Heitman managed $37 billion in assets, including $33 billion in private equity real estate, as of March 31, according to LACERS’ meeting materials.