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PGIM raises Asia fund’s hard-cap amid surge in investor interest

The firm attracted 30% of Fund IV’s capital during the pandemic because of the vehicle’s untapped dry powder and focus on the region.

PGIM Real Estate increased its €750 million hard-cap for its fourth value-add fund in Asia-Pacific as it saw substantial investor interest during the pandemic, according to PERE.

On track to close Asia Pacific Value-Add Fund IV at €820 million, the firm has corralled more than €800 million from investors. PERE can reveal that PGIM got investors’ approval to raise the fund’s hard-cap as it received substantial interest from institutional investors in the product during the pandemic, according to Benett Theseira, head of Asia-Pacific for PGIM Real Estate. Launched in 2019, the vehicle had an original €650 million target and a €750 million hard-cap. It raised approximately 30 percent of its capital after the outbreak of covid-19, according to Theseira.

PGIM started talking to existing investors in the fund for a hard-cap extension in the first quarter of 2020 and received approval at the end of the quarter to do so. However, the firm did not set a new hard-cap and instead accommodated the new investors’ commitments that exceeded the original hard-cap. “We had some additional interest from investors during the pandemic. One of the biggest drivers was that investors believed Asia will recover sooner and better than other regions,” explained Theseira.

Indeed, the growing investor interest in the region has also been reflected in the latest investment intention survey published by ANREV, INREV and PREA. The survey pointed out 72 percent of investors expect their allocation to Asia Pacific to increase over the next two years, far higher than the proportion expecting an increase in allocation to the other regions.

Apart from the fund’s geographical strategy, the fact that PGIM has not deployed any of Fund IV’s capital so far has contributed to its successful fundraise, according to Theseira. PERE can reveal that the firm only started its investment program for the fund in the second half of 2020. Currently, it is at an advanced stage in a number of deals but has not yet closed on a transaction.

“We are fortunate not to have deployed before the pandemic, so we are really well positioned for investing,” said Theseira. He noted that the firm actually pulled out of a number of deals before the pandemic as it was not “comfortable with the pricing” and believed the market was overheated. “We didn’t plan it that way. But in that sense, it did help in terms of our positioning with the investors.”

Beside the value-add series, PGIM will restart fundraising for its pan-Asia open-ended core fund PGIM Real Estate Asia Core as it believes global investors will be interested in finding opportunities the region’s core space post-pandemic. The firm is understood to have raised $447 million for the core fund as of September 2019.

“We didn’t do any fundraising for core last year since raising capital for core is quite difficult during the pandemic. Core investors tend to be quite risk-averse and they would take a pause or focus on their own domestic markets during a time like this,” Theseira explained.

PGIM Real Estate currently has an AUM of $7.3 billion in Asia-Pacific across core-plus, value-add and core strategy.