ASIA NEWS: On the block

The firm behind the largest private equity real estate fund in Asia is in play. MGPA, the Asia- and Europe-focused firm, currently is in advanced negotiations to be sold in what could be the biggest corporate transaction in the industry globally this year.

As PERE revealed last month, MGPA is being advised on its sale by a boutique investment bank and a law firm, and prospective bidders, including large insurance companies and asset management firms, already have undertaken due diligence. At press time, a preferred bidder was yet to be identified, although that was expected to happen this month.

It is uncertain how much MGPA, which is 56 percent owned by Macquarie Group and the remainder by its management, would cost. Australia’s Financial Review estimated the firm could change hands for more than $200 million, although PERE sources have suggested that figure was high.

Nonetheless, the amount of money paid is expected, in part, to reflect the amount of capital MGPA has to invest currently and what it can raise going forward, all of which garner fees. The value of the co-investment capital injected by MGPA into its various real estate funds also is likely to be a factor.

Formed in 2004 as an amalgam of Macquarie and a management buyout of the real estate funds business of Australian property company Lend Lease, MGPA has since attracted $8.6 billion of equity for 11 funds. Included in that total is $3.9 billion for its MGPA Asia Fund III – the most ever raised for a fund focused on Asia.

MGPA’s strategy for Asia Fund III raised question marks in the market when it paid S$2.97 billion ($2.3 billion; €1.8 billion) to the Singapore Urban Redevelopment Authority for two land plots at the Marina View development area in Singapore immediately prior to the downturn. With rental levels subsequently falling, the firm was criticised for its original underwriting of the development of the Asia Square towers on the sites and for concentrating so much resource to one market. However, rental levels since have recovered significantly, and certain commentators now expect a return for investors on the fund’s original investment, albeit shy of opportunistic levels.

As exemplified by Asia Square, MGPA is well-known for its operational credentials versus some of its private equity rivals, which have depended more on allocating capital to third-party developers and property companies. MGPA employees about 240 staff across offices in Singapore, London, Beijing, Tokyo, Hong Kong, Warsaw, Paris and Luxembourg, and it is this depth in real estate experience that also could play an important part for groups seeking a strategic fit and, indeed, in the determination of the sale price.

In terms of future fundraising activity, MGPA is understood to be laying the groundwork for MGPA Asia Fund IV and already has hauled $100 million for its Europe-focused counterpart. The firm also has invested in Europe via a separate account with a North American investor and invests retail capital on behalf of a sub-advisory mandate awarded by Orlando-based REIT manager CNL Financial Group. MGPA declined to comment.