Pacific Star targets European LPs for $2bn Asia vehicle

The Singapore firm has set up a joint venture in Germany to attract commitments from European institutional investors keen to invest in Asian real estate.

Pacific Star Group, the Singaporean real estate investor, is set to tap demand among European limited partners for Asian real estate via a joint venture business based in Germany.

The JV, Pacific Star Europe, is 51 percent owned by Pacific Star and 49 percent owned by German property entrepreneurs Matthias Sturmer and Dirk Grosse-Wordemann, and will target European institutional investors keen to diversify their property holdings.

According to Pacific Star, the JV will be offering European investors the chance to invest in a $2 billion (€1.27 billion) umbrella fund targeting four areas: India, China, Japan/Korea and Southeast Asia. Though the fundraising is being managed from Munich, the property vehicle itself will be managed by Pacific Star Alternative Investments in Singapore.

The fundraising comes at a time when various reports are suggesting fund managers are scaling back plans to launch similar Asian vehicles. Private equity firms have recently been reporting that funds dedicated to Asian infrastructure and real estate are facing a tightened fundraising environment, and that the targets for these funds may have to be scaled down.

Nevertheless, Pacific Star Europe is pinning its hopes on demand remaining strong among European institutional investors to diversify their property holdings.

The firm expects to hold a first close at the beginning of the summer and is promising potential investors a target internal rate of return of up to 16 percent. The establishment of the fundraising joint venture could lead to a contra arrangement to raise money from Asian investments looking to invest in European property.

Pacific Star has launched several real estate funds in the past 12 months. In March, the firm launched the $800 million GOME Pacstar Fund with GOME Property Investments, owned by Chinese businessman Wong Kwong Yu, to invest in China. In October, it followed the fund with a €500 million vehicle with an HSH Nordbank subsidiary to acquire prime properties in the Asia Pacific region. Then in December it launched a $400 million Asia Real Estate Prime Development Fund, whose first investment is in Thailand.

Pacific Star Group was founded in 2000 by US private property developer Jeff Tay.