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PAG passes $1bn mark for Asia core fund – Exclusive

The Hong Kong-based investment management firm is understood to be anticipating a final closing for its PAG Real Estate Partners fund in the summer. 

PAG, the Hong Kong-based investment management firm, has raised more than $1 billion for its first pan-Asia, core-plus strategy private real estate fund, PERE can reveal.

The firm is understood to have held its latest closing for its PAG Real Estate Partners fund within the last fortnight and is due to hold a final closing for the vehicle by June at which point approximately $1.2 billion is expected to have been raised.

To that end, active fundraising for the fund is understood to have finished.

The current total sees PAG match its original fundraising target set early last year when the closed-ended vehicle was brought to the marketplace. PERE revealed the fund’s first closing of $400 million last April.

Then, the firm was expecting equity commitments from between 10 investors and 15 investors. PAG was also expected to commit up to $20 million, or 2 percent of the total fund, from its own resources.

The capital raised is to be invested in core assets with strong cash flow across nine gateway cities in Asia. The firm is expected to focus on markets where it has already demonstrated its investment capabilities, including Japan and Australia. Chinese investments can be made for up to 20 percent of the fund’s capital.

Early deals for the fund included the purchase of a large portfolio of assets from GE Japan Corporation, as part of the latter’s exit from the property market.

PAG, previously known as Pacific Alliance Group, is expecting net returns of 10 percent to 13 percent from the vehicle.

In March 2014, PERE obtained a copy of the marketing teaser outlining the investment strategy for the fund. According to the document, the firm was likely to hold investments for an average of seven years within the fund’s life span of between 10 years and 12 years. The firm was also said to be targeting moderate leverage of 50 percent to 60 percent.

Meanwhile, PAG is also in the early months of raising its sixth opportunity fund, for which it hopes to attract as much as $1.5 billion in commitments. The firm has enjoyed meaningful capital support following the performance of its fifth fund for which it is projecting gross returns of more than 50 percent IRR, well higher than the typical 20 percent IRR expected from opportunistic real estate vehicles.

If crystalized, that would be PAG’s highest real estate return to date.

Park Hill Real Estate has been assisting the firm in its capital raising efforts.
PAG declined to comment.