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LaSalle holds first closing for reduced Asia fund

The Chicago-based firm has raised $192 million in a first closing for its LaSalle Asia Opportunity Fund IV but reduced its fundraising target to $500 million from $750 million, according to a note to investors obtained by PERE this month. It has enjoyed comparatively more success raising $431 million for its third Japanese logistics fund.

LaSalle Investment Management, the real estate investment management business of global property services firm Jones Lang LaSalle, has held a long-awaited first closing for the fourth fund in its pan-Asia opportunistic fund series, LaSalle Asia Opportunity Fund IV.

A note to investors, obtained this month by PERE, revealed the firm has collected $192 million for the fund. The capital has come from repeat investors which backed the firm’s previous pan-regional effort, LaSalle Asia Opportunity Fund III. That vehicle attracted $3 billion of equity in 2007 and was the second largest equity haul for a pan-Asia opportunity real estate fund to date behind rival MGPA’s MGPA Asia Fund III, which attracted $3.9 billion at about the same time.

In the note, LaSalle also revealed it had an equity raising target for the fourth fund of $500 million, far less than the total raised for Fund III before the start of the global financial crisis. Significantly, this was also down from its original $750 million target reported at the end of 2011.

The fourth fund is understood to have suffered from adverse institutional investor appetite for pan-regional opportunity funds in the region during 2012. Further, while its performance to date has not been particularly poor when compared to funds of its vintage, the vintage itself has produced few positive results and has influenced investors to seek more bespoke and particular conduits to investing in Asian private real estate.

The New Jersey Division of Investment was one investor in Fund III. The US pension reported in a note on its investments in April that a stake in the vehicle costing $62.4 million was today valued at $57.6 million, indicating a current equity multiple of 0.92 percent. An exit at that valuation would result in a loss but is understood to be not far off top-quartile position among funds of its vintage and with time still on it side the firm could still recover the fund's equity. Nonetheless, New Jersey included its stake in Fund III in a wider portfolio sale of secondary interests to a partnership between NorthStar Realty Finance and funds managed by Goldman Sachs Asset Management, earlier this summer.

According to various PERE sources, 2013 has seen a slight up-tick in enthusiasm for pan-Asia opportunistic funds from institutions and now that LaSalle has held a first closing for the Asia fund, the firm is understood to be marketing the vehicle beyond repeat investors. It is targeting a final closing later this year.

New investors would be backing a fund that has already deployed capital into a seed portfolio of four assets in China and Japan with an aggregate value of $180 million, the note detailed. These assets already are income producing and were bought at discounts to market value, the firm told investors.

While it has taken more than 18 months to reach a first closing for Fund IV, LaSalle has been able to corral meaningful equity across its Asia business, bringing aboard a total of $873 million from investors in that time. The firm has enjoyed quicker capital raising success for its Japanese logistics fund series, raising $431 million for its latest vehicle, Japan Logistics Fund III, in just nine months. That money was raised from three institutions including Dutch pension manager Algemene Pensioen Group (APG).

The first vehicle in the Japanese logistics fund series was raised in 2004, the second in 2007. The first has been completely exited and the second is on the cusp of being completely exited. Like those funds, Logistics Fund III will be focused on development opportunities in Tokyo and Osaka.

LaSalle also is understood to have raised and deployed $250 million in Japan and Australia over the last year for side-car and other specific investment mandates.

Between these capital raises the firm therefore has significant dry powder to invest in the region over the coming years. Its current assets under management in Asia are were valued at the end of the second quarter at approximately $5.5 billion and it has been something of a net seller over recent years but its recent capital raisings indicate it will be more acquisitive in the near to medium term.

LaSalle declined to comment on its fundraising activities.