PAG Real Estate, the real estate business of the Hong Kong-based alternative investments firm PAG, has beaten its own fundraising record at the final closing of its seventh opportunistic fund, raising $1.9 billion from institutional investors.
The closing of Secured Capital Real Estate Partners VI, which is due to be announced this week, followed commitments from approximately 20 investors from North America, Europe and Asia, PERE has learned. The fundraising took less than a year to complete.
Among the investors was the Canada Pension Plan Investment Board, the pension manager, which committed $375 million.
PAG originally hoped for $1.5 billion of commitments from its investor base for the 10-year vehicle and had set a $1.7 billion hard-cap. However, following excess demand, the firm was able to extend that cap to $1.9 billion to accommodate the extra capital.
PAG’s investor appeal follows strong performances for SCREP V, which is understood to be generating a 30 percent-plus net IRR and a net equity multiple of between 1.6x and 1.7x, according to one source familiar with the firm. The fund series’ aggregate return has been in the 17-20 percent net IRR range, the source said.
As well as a company record, the raising is also the highest amount of capital collected for a Japan-focused real estate opportunity fund. It exceeds the $1.65 billion raised by Fortress Investment Group for its Fortress Japan Opportunity Fund II in 2012, although that vehicle is entirely dedicated to Japanese investments.
Devised by Tokyo-based Secured Capital, the SCREP series was historically focused on making Japanese investments, typically in the distressed asset and non-performing loan markets of Japan. When PAG merged with Secured Capital in 2010, it was able to combine the pan-regional and Japanese operations, allowing the real estate unit to also target China, Korea and Australia.
To date, SCREP VI has been deployed into the market across eight deals valued at about $400 million, including investments in Japan, China and Hong Kong. While no set allocation for the fund exists, it is thought as much as 35 percent could be deployed outside of Japan.
Placement agent Park Hill Real Estate assisted PAG in its fundraising.
PAG Real Estate currently manages $5 billion in real estate assets and employs more than 140 staff across seven offices in Asia. Parent company PAG has approximately $18 billion of equity under management and 350 staff.
According to PERE data, 15 value-add or opportunity real estate funds with a Japan-dominant strategy have seen final closings since the global financial crisis, collecting an aggregate of $9.55 billion. Much of that capital was raised by PAG and Fortress, as well as Global Logistic Properties, GreenOak Real Estate and LaSalle Investment Management.