PAG targets $1.5bn for sixth oppo fund – exclusive

The PPM for its latest fund is due to hit investors’ desks in the coming couple of weeks and comes as the private equity firm is close to completely investing Fund V.

PAG Real Estate, the private equity real estate business of Asian private equity firm PAG, has launched fundraising for its sixth opportunity fund, PERE can reveal.

Prospective investors are expected to receive the firm’s private placement memorandum during the coming fortnight for a fund for which the firm is aiming to raise as much as $1.5 billion.

PAG raised the same amount for the fund’s predecessor, the Japan-focused Secured Capital Real Estate Partners (SCREP) V, although that was a the result of PAG enlarging its net by 50 percent in the face of sheer investor demand and what it regarded to be a greater market opportunity than originally thought.

SCREP V is now believed to be between 85 percent and 90 percent deployed, past a documented prerequisite hurdle enabling PAG to approach investors for capital once again.

PAG comes back to the capital markets with impressive recent performance to demonstrate as it markets the vehicle. According to sources, SCREP V 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, the return would be the firm’s highest recorded to date.

PAG declined to comment. But one source, familiar with the firm who declined to be named due to the confidentiality of the matter, said PAG’s strong fund performance was highly correlated to the positive fiscal and economic initial impact of Prime Minister Shinzo Abe’s government.

He said: “There’s definitely been some tail wind. It was a 2012 fund, the same year Abe came into power. The timing was perfect. [PAG] is outperforming, but everybody should be doing well.”

Nevertheless, it is understood that, while SCREP V had a provision for 15 percent of the capital to be invested in China, the sixth fund would have an even greater remit to invest beyond Japan.

Most of the capital, however, will be deployed into its best regarded competency, namely distressed real estate and non and sub-performing real estate credit.

PAG also is raising capital for its core Asia fund. For that fund, the firm is aiming to corral about $1 billion and has raised at least $400 million to date. The money raised for it has already been deployed into transactions including a portfolio of assets from GE Japan Corporation, as part of the latter’s exit from the property market.

PAG Real Estate has a team of more than 100 professionals working from offices in Tokyo, Shanghai, Beijing, Hong Kong, Singapore and Sydney. The firm has deployed more than $20 billion in about 500 deals across core, value-added and opportunistic strategies.