Few can deny that the balance of power has swung in favour of limited partners as they thrash out fund agreements with their general partners. Don Lam, chief executive at Vietnamese asset management, investment banking and real estate consultancy VinaCapital, has acknowledged this prior to the launch of the firm's second real estate fund.
Speaking to PERE, Lam said that although a fund design is already in place, its structure could ultimately be influenced by the demands of its anchor investors. VinaCapital hit the fundraising trail in the same month and is hoping to raise up to $500 million by February 2010. A first close on the opportunistic vehicle is anticipated before June this year.
An anchor LP could secure the right of first refusal to co-invest in deals outside the fund, giving the investor JV partner status. “That's the sort of power an anchor LP has. That's a reality now. It's become a benefit of coming in early.
Former PricewaterhouseCoopers partner, Lam said the Ho Chi Minh City-based firm was in advanced talks with anchor LPs about initial commitments to the vehicle. But he said that structural elements of the vehicle could be modified to entice these investors to cement their commitments. Among the possible sweeteners were a say over fund length and co-investment rights.
Lam declined to discuss the fund in detail, but it is expected to be a seven-year vehicle with a two-year extension option. Lam said the firm had been asked whether it would consider scaling it back to five years in length with the two-year extension option.
In addition, he said an anchor LP could secure the right of first refusal to co-invest in deals outside the fund, giving the investor JV partner status. “That's the sort of power an anchor LP has,” said Lam. “That's a reality now. It's become a benefit of coming in early.”
Lam would not confirm target returns for the vehicle, however similar themed vehicles in Vietnam have targeted a return of more than 30 percent. Last year, VinaLand (VinaCapital's first listed property fund) returned 16.8 percent to its investors.
With AIM-listed real estate funds trading at significant discounts to their net asset values – VinaLand itself had a market capitalisation of just $245 million as of 31 January – Lam said the second vehicle would be privately funded.
The second fund will target distressed assets across the property sectors, with a secondary focus on greenfield assets and real estate equities, capping single investments at $50 million. Vietnam is to account for 70 percent of its expenditure but VinaCapital may also invest in Laos and Cambodia.