Pramerica Real Estate Investors (PREI) Asia is targeting a capital raise of S$500 million (€308.7 million; $400 million) for its open-ended Pramerica AsiaRetail fund as it looks to make new acquisitions and reduce the debt of the S$3 billion vehicle.
The Asian real estate investment management business of Pramerica Investment Management, part of Prudential Financial, is looking to add to the fund’s seven existing institutional investors and anticipates having the capital in place over the next 12 months. No placement agent has been appointed with marketing expected to happen via internal resources.
Investors would be buying into a fund currently holding 11 assets comprising about 3 million square feet of urban mall retail space in Singapore and Malaysia. The fund has been in operation since October 2011 when PREI combined two closed-ended retail development funds after investors behind 20 percent of the fund’s capital sought to exit from their positions.
The process of transferring the units from exiting investors has taken time but, now, with the fund positions taken up, PREI is seeking additional capital to expand its reach in both markets, particularly in Malaysia.
PREI is also keen to reduce the fund’s gearing ratio to 40 percent loan to value from 45 percent where it stands currently. This reduction in leverage would ensure the vehicle can be classified as a core fund. The assets of the fund have returned 13 percent to 16 percent a year in the past. Now that most of the assets have been developed, the fund is still expected to return between 8 percent and 10 percent through a mixture of income and growth.
The fund can also undertake development, accounting for up to 20 percent of its assets, which could improve returns. However, the focus is likely to remain on stable, income-generating properties to be held on a long term basis.
The capital raising comes at a time when international institutional investors are taking a more serious look at core, open-ended real estate funds in Asia. In January, Invesco Real Estate launched its first fund of the sort in Asia, targeting $1 billion over five years, and already has a commitment from US pension fund Los Angeles County Employees Retirement Association (LACERA) for $100 million. Both funds follow that of PRUPIM, part of UK insurance giant Prudential’s M&G asset management business, which launched in 2007 with seed capital of $600 million. That fund currently manages assets valued at $1.5 billion.