Almost 65 percent of the investors that have committed to LaSalle Investment Management’s fifth pan-Asia opportunistic fund are from outside the US, a departure from the stateside-dominated LP composition of the predecessor funds in the series.
In a statement published this morning, the firm announced that it had raised $1.15 billion in equity for LaSalle Asia Opportunity Fund (LAO) V, including co-investment capital. Of the total capital raised, 85 percent is the fund’s capital while 15 percent is targeted for co-investments.
The final close exceeds the $750 million initial capital raising target set at the time of the closed-end, pan-Asia fund’s launch in August 2016.
LaSalle raised the capital from 20 global institutional investors, with over half being new investors. Mark Gabbay, chief executive officer and chief investment officer for Asia-Pacific at the firm, told PERE that LAO V has a much more global makeup than the firm has had historically with the predecessor funds in the series. More than 50 percent of the LPs in the LaSalle Asia Opportunity Fund IV for instance were US investors.
In contrast, US investors comprise around 35 percent of Fund V’s capital. According to PERE data, these include the Arkansas Teacher Retirement System, the California State Teachers’ Retirement System, the Los Angeles Water & Power Employees Retirement Plan, and the San Diego City Employees’ Retirement System. Around 40 percent are Middle Eastern investors, 10 percent Europeans, and for the first time for the fund series, as much as 15 percent are Asian-based investors, PERE understands.
Gabbay says the capital raise reflects the increasing global investor demand for diversified pan-Asia strategies. This demand was the main driver behind LaSalle’s decision to up LAO V’s fund target from $750 million to $1 billion last August.
“There is definitely investor uptick looking to be in diversified strategies versus some of the more singular strategies that had been a lot more popular in the past couple of years,” said Gabbay. “Many more new investors are looking to get into the region.”
Gabbay added that global investors have perpetually been under-allocated to Asia versus other regions, but the solid fundamentals in the region, not just for opportunistic but also core strategies, have been a major draw.
“There is no question that the pan-Asian core strategies that probably started getting investor demand about two years ago started tipping some of the capital flows in this area,” he added.
In keeping with the larger fund size, the firm has increased the investment period of LAO V from three to four years. Additionally, LaSalle will also look to do larger ticket size transactions – around $200 million to $350 million in gross asset value – versus the sub-$150 million deals done via the previous funds.
In terms of deployment, LAO V will follow the same investment strategy as its $585 million predecessor fund by targeting assets with repositioning and redevelopment potential in markets, including Australia, China, Hong Kong, Japan, Korea and Singapore.
However, Gabbay anticipates Australia to take up a lesser proportion of Fund V’s equity, compared with Fund IV, given the challenges of finding higher return deals in the country. Almost 35 percent of Fund IV’s capital was invested in Australia. On the other hand, the firm plans to increase its allocation to China – more than a quarter of Fund V’s equity – across different asset types, including office and logistics.
LaSalle has invested an aggregate of approximately $11 billion on behalf of the Asia opportunity series to date. As of Q1, 2018, LAO IV has returned 89 percent of the equity deployed and the fund’s returns since inception are 39.1 percent with a 1.61x equity multiple, according to the firm.