Singapore-based private equity real estate firm SilkRoad Property Partners has raised $377 million in the first close of its second pan Asia value-add fund.
According to sources familiar with the fundraising, around 80 percent of the capital consists of re-ups from LPs, including European institutional investors that invested in SilkRoad’s debut vehicle. SilkRoad declined to comment on the fundraising.
With SilkRoad Asia Value Partners II, understood to have been officially brought to market this summer, the firm is targeting a raise of a minimum of $500 million. The size of the fund, if successfully closed, would be roughly similar to its predecessor, which was launched with a $350 million target in 2014, but ultimately corralled $445.5 million in June 2016.
SilkRoad’s latest capital haul comes at a time of positive fundraising momentum for Asia-focused strategies. According to PERE data, around $14 billion has been raised for Asia-Pacific-focused closed-end real estate investment vehicles as of the third quarter of 2018. With one quarter remaining, the fundraising total has already surpassed $10.5 billion raised in the whole of 2017. Several value-add funds are part of this year’s total, including AEW Asia’s $1.12 billion closing of Aew Value Investors Asia III in June.
In light of the late-cycle environment globally and lowering total returns across the risk and return spectrum, SilkRoad Property Partners is also believed to have lowered its return targets for Fund II. SilkRoad Asia Value Partners had a net 15 percent IRR target, but the latest fund is targeting around 200 basis points less.
The latest fund’s investments will follow the same strategy of the debut fund in that it will seek value-add opportunities in Hong Kong, Singapore and Tier 1 Chinese cities.
The firm had set a 20 percent allocation ceiling for investing in China, but has increased that to 30 percent for its latest fund. SilkRoad is not the only value-add player to be opportunistic on China. PERE has learned about another manager operating one of the biggest pan-Asia value-add funds which has also raised its allocation limit to China to 30 percent for its latest fund.
According to a Savills report, value-add or core-plus investors are seeking assets with rental reversion or leasing capabilities in Grade A office properties in decentralized locations in China to achieve higher returns. Some investors are also repositioning underperforming retail assets, the report noted.
SilkRoad Property Partners is led by Peter Wittendorp, who previously headed the Boston-based firm AEW’s Asia-Pacific operations.