ASIA NEWS: The missing ingredient

After acquiring the Asian real estate platform of American International Group (AIG) in 2011, Invesco Real Estate, the real estate investment management business of global asset manager Invesco, had most of the hallmarks of becoming one of the region’s most impactful players.

Indeed, the AIG acquisition boosted Invesco’s real estate assets under management in Asia from less than $500 million to $7.7 billion today and enabled the platform to grow by 72 professionals to 80 staffers across six offices in the region. Aside from managing the equity in AIG’s most recent opportunity fund, the $740 million AIG Asia Real Estate Partners II, the only ingredient missing was new funds.

Last month, however, all that changed when word came that Invesco Real Estate, led in Asia by managing directors Cheng-Soon Lau and Graeme Torre, had taken steps to address that omission with the concurrent launches of an open-ended core fund and an opportunity fund for investments across the region.

News of Invesco Real Estate Asia, the open-ended core fund, surfaced via a note made public by the Los Angeles County Employees Retirement Association (LACERA), which recommended a commitment of up to $100 million to the vehicle. The fund would be one of the first for Asian real estate structured in such a manner, addressing a growing need by investors, like the Los Angeles pension, to diversify their core real estate exposure geographically.

After re-evaluating its view of investments in Asia as generally demanding higher-risk premiums than investments in the US and positive experiences investing with Invesco via separate accounts, LACERA –with a recommendation from Cleveland-based real estate consultant The Townsend Group – will become the fund’s cornerstone investor. The commitment is the pension plan’s first to a core real estate strategy outside of the US.

The core fund is expected to return between 8 percent and 10 percent from investments initially made predominantly in Japan (where Invesco inherited a lot of staff from AIG) and Australia before growing its reach with further investments in South Korea, China, Singapore and Hong Kong. Within five years, Invesco hopes to have corralled $1 billion in equity for the vehicle.

Also last month, PERE revealed the launch of Invesco Asia Real Estate Partners III, a closed-ended opportunity fund that would seek $800 million of equity from investors. Investing in similar markets, Invesco is understood to be targeting IRRs of between 15 percent and 18 percent from the eight-year fund. Fundraising for this vehicle is a little behind that of its core cousin, with a first closing expected after the first quarter of this year.

Success in fundraising for these two vehicles would rubberstamp Invesco as one of the largest private equity real estate players in Asia and would strike a stark contrast to how the platform looked back in 2006, when Lau arrived from Ayala International to grow it. Invesco declined to comment.