New Zealand’s Du Val Group targets $1bn for debut funds

Du Val Group, an Auckland, New Zealand-based real estate investment management firm, is aiming to attract almost $1 billion of capital commitments for its first two private equity real estate funds.

The firm, headed by chairman Peter Clarke, managing director Jason Smith and directors Matt Cole, Glen Williams and David Kilburn, this week took the first of the vehicles, the Du Val Mid-Market Fund, to the market. The firm is targeting NZ$250 million (€138 million; $178 million) for the fund from high net worth individuals and small institutions from Hong Kong, Singapore and New Zealand. The second vehicle is the Du Val Opportunity Fund, which is targeting NZ$1.1 billion and is to be marketed from November to large institutions in the region.

The Du Val Mid-Market Fund has been devised to invest in assets across the real estate sectors valued between $5 million and $50 million. It will target investments in New Zealand’s largest cities and will use leverage of between 60 percent and 70 percent. The Opportunity Fund will invest in assets, predominately office and retail, valued at between $50 million and $300 million in major cities in both New Zealand and Australia.

Both vehicles are targeting IRRs of more than 20 percent and eventual exits via public listings on the New Zealand and Hong Kong stock exchanges.

Du Val, which was formed in 2009 and is the successor business of the UK-based Clarke Family office, had previously invested using club structures through which it claimed to have generated average gross IRRs of 20 percent. However, William Nobrega, managing partner of the Conrad Group, which advises Du Val, said the firm was planning to capitalise on increasingly negative sentiment towards China’s overheating real estate market by offering investors exposure to the New Zealand and Australian real estate markets. These markets, he said offered more “transparency” and “predictability”.

He said: “The basic premise to these funds is that Asia’s recovery is driven, in large part by China’s GDP growth. However the issue is that China’s real estate market is clearly overheated. The question for some investors is 'how do I take advantage of China’s growth without getting exposed to its real estate?'. The short answer is you look at markets benefiting from China’s growth and these include New Zealand and Australia. Both countries have experienced a surge in exports to China and as a result are enjoying significant benefits from capital inflows.”