Tokyo-based private equity real estate firm Secured Capital has exceeded the original capital raising target for its fifth opportunity fund by 50 percent by capturing $1.5 billion, PERE can reveal.
The firm is expected to announce tomorrow the final closing of its Secured Capital Real Estate Partners (SCREP) V fund – its largest since its inception in 1997. The capital has been committed by a mix of existing and new investors to the firm hailing from the US, Asia and Europe.
The equity raising is a further sign of improving private capital market sentiment for Asian real estate investment funds and puts Secured Capital on a growing list of final closers managing more than $1 billion since the start of the global financial crisis including Japan rival Fortress Investment Group, Alpha Investment Partners, Gaw Capital Partners, Global Logistic Properties and Mapletree Investments.
The crisis precipitated a series of poor vintages for real estate investment vehicles between 2006 and 2008 putting off many institutional investors from committing equity. However, as global markets have improved and vintages from 2009 have started to demonstrate healthier returns, appetite for funds has improved in tandem.
The US was the first region to experience a meaningful return by investors and Europe has seen increasing signs of improvement. However Asia funds in 2013 already collected more capital from investors by the end of the third quarter than they did for all of 2012. According to PERE’s Research and Analytics division, $10.25 billion had been collected as of last month versus $10.10 billion for 2012.
J-P Toppino, president and chief investment officer acknowledged the increased support for his firm’s fund in a statement. He said: “We are encouraged by the support we have received from existing and new investors globally.”
SCREP V, which predominantly has a Japan distressed real estate and debt focus, but which can also be invested in China, Korea and Australia, has already been committed to 11 investments valued at $1.8 billion. The fund is expected to run for eight years with options for two one-year extensions. It is expected to generate returns for investors of between 17 percent and 20 percent IRR and a 2x equity multiple.
Toppino said: “We believe that the Japanese debt market provides some of the best risk adjusted returns globally as a result of a large opportunity and a limited availability of capital. We have great conviction in this strategy.”
“Notwithstanding, we are also seeing attractive opportunities outside of Japan and we have an excellent regional team who are well positioned to take advantage of strategic opportunities as they arise in markets such as Australia, China and Korea.”
Secured Capital is best known for its opportunistic investing however the firm also closed on $300 million for a core real estate club fund called Tokyo Recovery Fund in partnership with Aviva Investors, the investment arm of UK insurer Aviva, in January. PERE understands the firm has just invested in a third asset on behalf of the vehicle, the Riverside Yomiuri Building (pictured) in Tokyo, bringing it to approximately two-thirds invested. While the firm declined to comment on future fundraising, a successor vehicle is understood to be in the works.
Additional reporting by Michelle Phillips