SC Capital estimates 29% IRR for its three Asia funds

Asia-focused private equity real estate SC Capital Partners and Group has revealed to PERE that the first three pan-Asia opportunity funds of the Real Estate Capital Asia Partners (RECAP) are generating an aggregate 29 percent IRR. 

According to managing director Suchad Chiaranussati, who founded the firm in 2004, the first RECAP fund, raised the next year, generated an IRR 13.9 percent and an equity multiple of 1.9x while the second is estimated to be producing an IRR of higher than 30 percent and an equity multiple of 1.7x so far.

The $221 million RECAP I, which was capitalized by just two investors, was materially divested in December 2012. The $190.3 million RECAP II was halfway divested in May, at which stage SC Capital was able to return all of that fund’s capital to its investors. 

The firm’s third fund, RECAP III is already generating opportunistic returns also, Chiaranussati said. The fund attracted $530 million and was closed in August last year but already its early investments are producing better returns than its previous funds, he said. Today approximately 40 percent of the capital has been deployed. 

The three funds combined are estimated to be giving SC Capital a 29 percent IRR, Chiaranussati said. When asked how the firm had regularly met or exceeded its targets, he credited its “discipline” and patience. He said at one stage when investing conditions and opportunities deteriorated before and immediately after the global financial crisis started, the firm placed a moratorium on investing.

“We were looking at a lot of deals, but we decided to walk away from them because we could not find any that would meet our underwriting and return requirements,” Chiaranussati told PERE. “We also took the perspective that if you don’t find the right deals, you don’t pull the trigger.”

He highlighted certain stand out investments including an investment for RECAP III in the Japan Hotel and Resorts REIT which was acquired in December 2012 and has so far generated returns that have exceeded expectations. 

SC Capital also reportedly invested in the Laguna Beach Resort in Phuket, Thailand, out of its RECAP II fund in April 2011. After extensive renovations, SC Capital was able to exit the resort to a US hotel operating company at an IRR north of 64 percent after a holding of just less than two years. The firm declined to comment on this investment.

The firm’s average loan-to-value ratio of its investments is about 50 percent. Most of its investments are in the developed markets of Tokyo, Singapore and Hong Kong although it also invests in emerging markets including China, Thailand and has investments in Australia.

SC Capital’s investors have become more diverse with each fund. About 99 percent of the firm’s capital comes from institutional investors, and all but two investors in RECAP II were from the US. In RECAP III, however, about 70 percent of investors were from the US, 20 percent were from Europe, and 10 percent were from Asia.