ASIA NEWS: Quickly and together

Most GPs promote themselves by offering their LPs one or two factors that separate them from the competition.

For Sydney-based Altis Property Partners, the Australia-focused investment manager launched in 2008 by ex-ICA Property Group and Valad Property Group executives, short investment periods and attractive co-investment possibilities are expected to help attract investors into its second opportunity fund.

In the first quarter of 2012, Altis plans to bring to market a successor fund to its debut blind-pool commingled effort, Altis Real Estate Equity Partnership, which it closed in April on A$107.1 million (€79.5 million; $107.9 million). The strategy remains the same – Altis believes there now is a “current cyclical opportunity” to “generate enhanced returns” from making investments in Australia’s non-core property markets, where the competitive landscape and available financing is thin.

“There is more selling by institutions of Australia’s non-core assets than anyone buying them,” pointed out Paul Notoras, one of Altis’ founding principals. As a result, Notoras and colleagues Shaun Hannah and Alastair Wright have been able to deploy more than 75 percent of fund one’s capital in less than a year, enabling Altis to hit the road for its second vehicle.

“We tend to have two-year investment periods, but we really want to be invested within 12 months,” said Notoras. Admitting that speed of investing is partly a function of scale, he nonetheless believes tight investment windows help to underline a firm’s belief in its own strategy. “The world changes quickly, and we don’t think its fair to investors to have a longer horizon,” he explained. “If we’re saying to investors there’s an opportunity, we need to believe we can get the capital out reasonably quickly.”

Fund two is expected to attract between A$150 million and A$250 million in commitments from between six and seven Australian and international institutional investors. Notoras noted that the larger target reflects how much capital ultimately was deployed the first time around, which is due to the fact that the four investors of the first fund used co-investment options for various deals.

While Altis’ funds are positioned for deals of between A$20 million and A$50 million, thanks to co-investments, transacting deals of A$80 million has been possible. Notoras thinks that could stretch to A$100 million in the future as the firm typically allows co-investment to account for up to 50 percent of a deal.
“That’s something we have found investors are looking at,” Notoras said. “Not just to put money into the fund, but to put money into a fund with a group where they think they can get some decent co-investment possibilities.”

The seven-year fund is expected to generate IRRs of between 16 percent and 18 percent, net of fees and costs, and an equity multiple of 1.7x, which is similar to Altis’ first fund. Like the first fund, Altis’ sponsor, the family office of the high-net-worth Solteri family, is expected to commit an initial A$25 million. Jones Lang LaSalle is advising on capital raising internationally, while the principals, who will commit up to 3 percent of the fund’s equity, are fundraising themselves within Australia.