Hong Kong and Singapore-focused private equity real estate firm Pamfleet Group has brought its capital raising efforts for its debut blind-pool, commingled real estate fund to a close.
The firm concluded fundraising for its Pamfleet Real Estate Fund (PREF) on 29 February on $209 million. That reflected a marginal increase on the $207.3 million raised at the fund’s second closing back in June and was shy of the firm’s original $330 million target.
However, despite the small increase, Pamfleet remains one of few private equity real estate firms with an Asia focus to raise capital via a traditional blind-pool, commingled closed-ended opportunity fund. In 2011, the year when most of the fund’s capital was attracted, it joined Arch Capital, ARA Asset Management and SC Management among a very limited number of real estate fund managers in the region pulling in a total of just $4.135 billion for such vehicles, according to PERE’s Capital Watch statistics – well shy of previous years leading up to the start of the global financial crisis.
Andrew Moore, chief executive officer at Pamfleet told PERE that the worsening macroeconomic situation in Europe and generally longer decision-making processes adopted by institutional investors were among the factors that led to the marginal increase in capital collected between the fund’s second and final closings.
He said that while investor sentiment for the firm’s two target markets had improved lately following a resultant dip, the fund’s capital raising period was stipulated to conclude at the end of February regardless. He said sidecar investment vehicles would unlikely be permitted in the event further investors wanted to partake in the fund’s deals.
Pamfleet will now enter into a three-year investment period for the fund through which it expects to generate a net IRR of between 17 percent and 20 percent from repositioning and adding value to properties of secondary caliber and locations within the two gateway cities. The fund’s overall life is seven years.
Moore said that while the capital raising environment had changed for the firm, its investment thesis remained intact. He said: “There’s been absolutely no change, nor would we envisage any change in our thesis.”
“We’re still very much about acquiring non-performing real estate assets with opportunities for upgrading and repositioning them, typically with significant amounts of renovation work.”
To date, the fund has concluded one investment in Hong Kong that sat within its investing criteria. Moore described the Hong Kong commercial property market as having gone through something of a soft period in which rents and capital values had dipped over a period of months last year. “There were some offers being thrown around that were well below vendors expectations,” he remarked.
However, according to Pamfleet numbers, approximately 20 whole-building transactions had taken place over the first two months of the year, valued at about HK$ 11 billion (€1.08 billion; $1.42 billion), compared with the same number of transactions in the previous six months valued at just HK$8 billion – a telling indicator that the market, including its secondary components, is experiencing renewed activity.
Meanwhile, Moore’s colleague, Pamfleet’s Singapore general manager Dougie Crichton, said the firm might benefit from the city-state’s prime office oversupply with sellers more willing to part with their investments. “The prime office market is facing oversupply with no net absorption and falling rents and increasing vacancy. Not an ideal market for someone who has bought into a core return.”
Pamfleet was formed in 2000 through a management buyout of former Hong Kong bank Jardine Fleming’s direct property fund management business. The seventeen-strong firm launched PREF after a decade transacting on a case by case basis on more than $352 million of equity investments. Those investments generated IRRs of 87 percent and a 2.7x multiple along the way, according to the firm’s marketing literature, seen by PERE.
Its fundraising efforts were assisted by Spearhead Capital Partners.