PAG raises $2.75bn despite covid-19 disruption – Exclusive

Due diligence was conducted remotely through video conferences for investors who came in after the outbreak of the pandemic.

PAG Real Estate, the real estate business of the Hong Kong-based alternative investment firm PAG, has closed its largest real estate fund at $2.75 billion amid the covid-19 pandemic.

Fundraising for Secured Capital Real Estate Partners VII was completed within a year, PERE can reveal, with strong investor interest leading the firm to extend the fund’s original $2 billion target by an additional $750 million.

A source close to the fundraise told PERE that coronavirus did not have a significant impact on the fundraising as initial trips to new investors were completed in 2019. Commitments from new investors after December saw due diligence conducted remotely by video conference due to travel restrictions.

After reaching a $2.5 billion first close in December, PAG is understood to have raised another $200 million between January and March this year, the majority of which is believed to be from new investors.

The fundraise attracted 25 investors from North America, Europe, the Middle East and Asia. It is understood 66 percent of the fund’s equity is from investors who re-upped.

PAG plans to start deploying the fund now that the capital raise has been completed, the source said.

Employees Retirement System of Texas and Teacher Retirement System of Texas committed $75 million and $150 million, respectively, according to PERE data.

PAG declined to comment on details of the fundraising, but the firm’s managing partner and group president Jon-Paul Toppino was grateful for the fundraising success in this “unprecedented period,” according to a statement seen by PERE, due to be released later this week.

“Like all investment firms we are watching the current coronavirus outbreak with concern, and our greatest priority is the health and safety of our staff and everyone we work with. Still, we remain confident that Asia and Japan in particular represent attractive long-term opportunities, and we hope to continue to justify the faith our investors have placed in us,” Toppino said.

PERE previously reported that PAG aims to invest around 60 percent of the latest fund’s equity in Japan and the rest in China, Australia, Korea and other selected markets. The Japan-heavy investment focus is in keeping with the strategy of the series.

As the firm’s flagship opportunistic fund, SCREP VII has a net return target in line with its predecessors, which typically have been 17-20 percent. With the prior fund, SCREP VI, the firm is understood to have realized approximately 10 percent of investments and anticipates net returns in excess of that target, according to the source. SCREP VI closed at $1.9 billion in 2017, exceeding its original target by $200 million.