LaSalle cancels $600m of commitments as it targets fourth Asia fund

The Chicago-based firm has opted not to seek an extension to the investment period of its $3 billion LaSalle Asia Opportunity Fund III in favour of bringing a successor fund to the market.

LaSalle Investment Management has cancelled approximately $600 million of capital commitments to its $3 billion LaSalle Asia Opportunity Fund (LAOF) III in order to focus on plans for a fourth pan-Asia opportunity fund.

PERE understands that, following the expiration of the investment period of LAOF III in June, at which stage the Chicago-based firm had invested approximately $2.4 billion of the fund’s $3 billion of committed capital, it has decided to embark on a fresh fundraising programme for a successor vehicle rather than seek an investment extension for the remaining capital.

As such, LaSalle has started soft marketing for LaSalle Asia Opportunity Fund IV, for which it aims to corral approximately $750 million, although it is understood there is no capital-raising cap. Promoting the vehicle to existing investors first, typical individual capital commitments are expected to be in the $50 million to $75 million range, and a first closing of up to $300 million has been targeted for the first quarter of 2012.

“[LaSalle thought] it was better to concentrate on the investment period, get its deals done, close the fund and then start afresh with investors that want to continue to invest in that kind of structure,” said one source familiar with the situation.

Having raised one of the biggest funds focused on opportunistic investments in Asia just as the global financial crisis was taking effect, LaSalle found itself sitting on the sidelines for the best part of two years, having invested relatively little equity. While not ideal for the fund’s IRR, ex-Asia head Jack Chandler told PERE in 2010 that the firm was keen not to make bad investments under pressure. “The worst thing a fund manager can do is rush,” he said at the time. “Going slower can be a drag on performance, but our partners have been very appreciative that we waited to restart making acquisitions until we felt the risk/return proposition made sense.” Subsequently, the firm was very active in 2010 and earlier this year up until the investment period of the fund expired.

The incoming fourth fund is expected to have similar investment targets to its larger predecessor, primarily focused on Australia, Japan and China with a secondary focus on Korea, Singapore, Hong Kong and Taiwan. About 60 percent of investments are expected to be income producing, with the remaining approximately 40 percent focused on refurbishment or development opportunities. Investments are expected to produce an IRR after fees and taxes of about 18 percent and an equity multiple between 1.7x and 1.8x.

While much of the structure is similar to LAOF III, the fourth fund is expected have a decreased leverage ceiling on investments from 75 percent to 70 percent and a decreased capital concentration cap on single transactions from 20 percent to between 15 percent and 10 percent. LaSalle declined to comment when approached.