|PAG, the Hong Kong-based investment management firm, has capped off fundraising for its first core-plus real estate fund after collecting $1.3 billion in commitments, surpassing the firm's original $1 billion target.
The firm, which manages $16 billion in equity across real estate, private equity and absolute return strategies, raised the capital from institutional investors including European insurer Allianz and Dutch pension fund manager PGGM. It is understood that most of the investors which have committed capital have previously backed the firm via other products.
“We enjoy strong support from our investors which we are very grateful for,” said Broderick Storie, partner at PAG. “As with our strategies, our focus remains to ensure we continue to drive and maximize investment performance and maintain best-in-class fiduciary standards.”
PAG declined to comment further on the fund's investors, however the PAG Real Estate Partners fund was understood to have been backed by between 10 and 15 investors, according to PERE's prior coverage. The firm was expected to have committed up to $20 million, or 2 percent of the fund's total equity.
The firm has already been busy deploying the fund's capital, stating it was already nearly 50 percent invested. Target investments for the vehicle are expected to be made across nine gateway cities in Asia, particularly in markets where the firm already has a demonstrable track record, such as Japan and Australia.
One early deal for the fund was the purchase of a large portfolio of assets from GE Japan Corporation, which conducted a major property sell-off after the firm's parent company opted to exit the asset class and streamline its operations. The portfolio comprised 26 assets, mainly offices in Tokyo, and was reported to have sold for about $1 billion.
Storie told PERE, PAG would take moderate market risk at the asset level when making investments for the fund, but that the firm would be loyal to certain “filters” when choosing assets. He said: “Our view of core-plus includes certain macro-views. Assessing each building, we look at its market liquidity – proven buyers and sellers – as well as proven occupier demand which implies real economic activity.”
Returns from investments made on behalf of the fund are expected to be between 10 percent to 13 percent net. According to a marketing teaser circulated to prospective investors at the time of the fund's launch in 2014, the fund has a life of 10 years and the expected hold period for its assets was about seven years.
Park Hill, the placement agent, assisted PAG in the capital raising.