Word of mouth helps Alpha expand investor base for $1.1bn APAC value-add fund

The Singaporean manager’s third Asia-Pacific value-add fund has closed above its initial target.

Re-ups and referrals have helped Alpha Investment Partners, the real estate funds management platform of the Singapore conglomerate Keppel Group, raise $1.1 billion, including co-investment capital, for its latest pan-Asia value add real estate vehicle.

The final close for Alpha Asia Macro Trends Fund III, announced last week, sees the firm exceeding its initial $1 billion target for the fund.

The successful fundraise was in part driven by commitments from new investors drawn in by the firm’s existing pool of investors, according to Alvin Mah, chief executive officer, of Alpha Investment Partners.

“We have been very fortunate to have supportive investors who have made referrals to new investors. This has allowed us to access new pools of capital,” said Mah.

The Munich-based Allianz Real Estate is one of the new LPs in the vehicle, with a $150 million commitment to AAMTF III. In addition, the real estate investment manager of the German insurer has, so far, also deployed approximately $100 million via a co-investment sidecar tied to the fund, according to Rushabh Desai, Allianz Real Estate’s Asia-Pacific chief executive.

In August 2017, for instance, Allianz struck a co-investment deal to acquire Trinity Tower, a 33-story office asset formerly known as Hongkou SOHO, in Shanghai for $525 million. AAMTF III holds a 40 percent stake while the remaining 60 percent was equally split between Allianz and Keppel Land China.

Furthermore in Shanghai, Allianz and Alpha formed a partnership to acquire Bay Valley C6, a 13-story office asset in a business park in September 2018, at a gross asset value of approximately $90 million. Allianz owns 41.5 percent of the equity while AAMTF III hold 48 percent and the remaining 10.5 percent is hold by another co-investor from the fund.

“Allianz Real Estate and Keppel have a strong relationship investing together in the region. AAMTF is a well-established pan-Asian diversified value-add fund series,” Desai told PERE “We particularly like the fact that AAMTF III has a strong presence in China as well as regularly offers opportunities for co-investments.”

Meanwhile, one of the repeating investors in the AAMTF series is the Salem-based Oregon Public Employees’ Retirement Fund under Oregon State Treasury. The US investor committed $200 million in AAMTF II and $100 million in AAMTF I, according to the public pension fund’s real estate portfolio overview as of end-June 2018

Like the previous two funds in the AAMTF series, AAMTF III is being invested in retail, residential, offices, business parks, and logistic facilities across key gateway cities in Asia-Pacific including Singapore, Shanghai, Beijing, Tokyo, Sydney, Melbourne, Brisbane and Seoul. To date, the fund has made investments in Shanghai, Tokyo and Brisbane and has so far invested 60 percent of the fund’s capital, according to Mah. When fully leveraged and invested, AAMTF III aim to have AUM  of about $2.4 billion.

Expected IRRs from AMMTF III’s investments are in the mid-teens, noted Mah. He also elaborated that AAMTF I and II have performed above Cambridge Associates benchmark of peer vintage funds. AAMTF I was launched in 2007, with a final close in 2008 of $1.18 billion, while AAMTF II launched in 2011 and closed in 2013 with $1.65 billion, according to PERE data.

According to Cambridge Associates’ latest Real Estate Index and Selected Benchmark Statistics from June 2018, value-add and opportunistic funds with vintage year in 2007 had a of 6.89 percent. Funds with 2011 as vintage year had a benchmark gross IRR of 15.46 percent.

However, according to Oregon Public Employees’ Retirement Fund’s real estate portfolio overview as of end-June 2018, AAMTF I was delivering an IRR of 7.44 percent while AAMTF II was generating 11.19 percent. The overview did not specify whether the IRR was gross or net.

Alpha Investment Partners manages six real estate and data centre funds with total AUM of $9.5 billion as of 31 December 2018 on a fully leveraged and invested basis.