In its latest research, broker CBRE said total commercial real estate investment reached $407 billion globally for H1 2015, the strongest first six months since 2007. Within that, the Americas registered comparative period year-on-year growth of 31 percent in dollar terms. Asia, on the other hand, saw volumes fall 19 percent.
This lack of transactional activity has been reflected in Asia capital raising, which too has trailed US and Europe this year. That is why the €700 million of separate accounts lined up by Bayerische Versorgungskammer (BVK), Germany’s biggest public pension fund manager, appears to have come against the current.
As PERE revealed last month, BVK is expected to award in equal amounts accounts to Singapore-based Alpha Investment Partners, the fund management business of listed-developer Keppel Land; CBRE Global Investment Partners, the joint venture investment business of LA-property services firm CBRE; and Hong Kong-based private equity real estate firm Arch Capital. Neither BVK nor the fund managers would confirm the mandates as talks between them are understood to be ongoing with terms and conditions being ironed out.
According to sources familiar with its plans, the Bavarian institution, which is responsible for approximately €59 billion of investment capital on behalf of about 1.9 million pensions has plans to capitalize on the current and relative unattractiveness of Asian real estate by mandating the three firms to grow its presence in the region.
It is understood that BVK has requested a range of risk and return strategies from the three investors with Alpha and CBRE expected to generate more core-plus style returns from outlays and Arch Capital more opportunistic returns.
While Alpha and CBRE are no strangers to separate accounts with institutional investors, such an offering is new for Arch Capital, which has traditionally invested via commingled real estate funds, although it has previously run sidecar co-investment vehicles.
BVK currently manages about €10 billion of real estate, €6 billion of which was acquired via indirect channels. Within that bucket, its existing global mandates to firms such as Chicago-based LaSalle Investment Management and Swiss bank UBS have the bandwidth to include Asian investments, but these new mandates to Alpha, CBRE and Arch are expected to bring the pension manager closer to its aim of having 25 percent of its indirect holdings in Asia.
They are also part of plans by BVK to double its indirect holdings to about €12 billion within four years.