UNITED STATES - AEW Capital Management has topped the original capital-raising set on its first direct real estate Asian investment commingled fund, as pension funds and investors are keen to diversify into new markets.
The amount raised for AEW Value Investors Asia eventually reached $558m (€374.7m) by its closing and is substantially higher than the total capital raising of $400m, according to Peter Wittendorp, managing director for AEW Asia, as the Aisan real estate are still drawing the attention from a great many investors.
"Our company decided to increase the size of the fund in response to market opportunities and investor demand," said Wittendorp.
"There was a lot of interest in the fund from US and European pension funds, insurance companies and high net-worth investors. I think the biggest draw for both US and European investors for Asia is the current and projected growth in the region. There are really three main drivers of real estate performance across the globe: GDP growth, a young and growing population and markets that will benefit from globalization. The fund's target markets in Asia are experiencing all three and investors want to take advantage of that growth," he added.
The total capitalization of the fund is projected to be in excess of $1.5bn with leverage so AEW will be making a $15m co-investment into the commingled fund.
More importantly, AEW believes there is a good story to be told for value-added investing in Asia, said Wittendorp.
"We think that there are many properties in the region that are in good locations, but are facing some issues such as dilapidation, having an inappropriate use, or an ownership structure that is holding back it's potential. With appropriate asset management these assets can, in many cases, be salvaged. We feel the risk-return trade-off from this strategy is very compelling as we don't have to take on all the risks associated with ground up development projects," he continued.
The Value Investors Asia fund will primarily invest in existing office, retail, residential, industrial and select hotel properties across a variety of markets in Asia, though the main focus will be Singapore and Hong Kong as the real estate manager plans to invest around 50% of the fund in these two markets.
Other areas be considered are the key urban and suburban markets of Thailand, Vietnam, China and Malaysia.
AEW's previous experience of investing in Asia was through placing capital in the listed property securities in the region.