TH Real Estate plans to launch an Asia-Pacific Cities Fund next year to invest in core real estate in the region.
The fund will be modelled on TH Real Estate’s core, open-ended European Cities Fund, which was launched in March last year and has already invested €1bn.
Speaking to media on a visit to Sydney today, Mike Sales, head of TH Real Estate, said: “The idea is to have a sister product for Asia-Pacific.”
TH Real Estate expects to begin marketing the new fund in the second quarter of 2018, Sales said.
“We will have money to start it up and the aim is to have hundreds of millions in real estate in the next two years [following the launch].”
The fund will invest in Singapore, Hong Kong, Tokyo and the main Australian cities.
Sales said the European Cities Fund has been well supported and is moving closer to €2bn in assets under management.
Last week, TH Real Estate raised an additional €422m for its European fund from five international investors, including one in Australia.
“We are hoping that this will be the kind of trajectory for our Asia-Pacific fund,” Sales said. “We are cognisant of where the markets are, and we will be incredibly selective.”
The firm has appointed an executive, to be based in Hong Kong, to head the Asia-Pacific fund.
TH Real Estate is also due to launch a large China retail fund, having last year announced an intention to create $2bn fund in conunction with Gaw Capital.
“We are pushing on with our Asia-Pacific expansion, but are also being very considered about where we go,” Sales said.
Currently, the firm has a presence in Australia, Hong Kong and Singapore, and it will have an office in Tokyo next year.
As part of its Asia-Pacific expansion plan, TH Real Estate has established a debt business for the region, based in Australia.
Sales said the firm has allocated “hundreds of million” to establish its APAC debt business. Martin Priestley, the firm’s newly-appointed head of the APAC debt business, said discussions are already under way and the first transactions could be completed before the end of the year.
Priestley said the focus initially will be on senior debt, but later, as the firm gets “more comfortable”, it will move up the risk curve. It would be hard to place debt into Asian markets, he said, but there was an opportunity to bring capital from the region into Australia.
“There are good opportunities in Japan for us to bring investors to Australia because of the level of returns they can get in Australia versus the returns in their domestic market,” said Priestley.
Jack Gay, TH Real Estate’s global head of commercial real estate debt, said debt had become mainstream for institutional investors, which look at it for certainty of income.
Gay expects to place some US$7bn in debt this year, with the key markets being the US and UK.
Sales said that, presently, Asia-Pacific represents “2% to 3%” of the US$110bn of assets under management at TH Real Estate. With the new funds it is creating, particularly its Asia-Pacific cities fund, TH Real Estate’s core exposure could rise to around 10% of AUM, he said.