New $250m private equity fund to target Malaysian property

A partnership between CapitaLand and Maybank Group is planning to raise a $250m private equity real estate vehicle for Malaysia.

Singapore-based developer CapitaLand has formed a partnership with Malaysian financial services company Maybank Group to raise a new private equity real estate fund targeting Malaysia, as the country draws greater interest from property investors.

The Malaysia Commercial Development Fund is targeting $250 million (€193 million) for investment in development projects across sectors primarily in the Klang Valley region, which includes Kuala Lumpur. One Mont’ Kiara, an office and retail complex, will be seeded to the fund, as will two other projects that have yet to be identified.

Malaysia has increasingly been attracting interest from real estate investors due to the country’s growing economy and favorable supply-demand characteristics. Earlier this year, Macquarie Global Property Advisors made its first investment in the region, acquiring three buildings in downtown Kuala Lumpur for RM680 million ($185 million; €144 million).

“We have been waiting to enter the Malaysian market,” Simon Treacy, a managing director with Macquarie, said at a mid-August signing ceremony. “We believe the current outlook for commercial property in Malaysia is favorable, with increasing demand for offices and limited new supply.”

CapitaLand and Maybank are reportedly promoting the new fund to investors in Bahrain and Dubai. Malaysia, where Islam is the official religion and shariah-compliant financing is readily available, has been actively courting Middle Eastern investors. Next year, for example, the country is expected to introduce a ten-year tax exemption for Islamic banks.

Earlier this week, CapitaLand, one of the largest developers in Southeast Asia, announced that it was raising a $630 million shariah-compliant fund to help finance Raffles City Bahrain, a $1 billion development in Bahrain’s capital city, Manama. The Singapore-based firm also recently lost out on a joint bid with Kerzner International, the resort and casino operator owned by a consortium of private equity firms, for the rights to develop a $3.4 billion resort on the Singaporean island of Sentosa. The winning bidder, Genting International, is based in Malaysia.