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Property

BlackRock to launch new Asia-focused real estate fund

Unit of private equity major expected to raise over $300m

  © AP

KUALA LUMPUR -- BlackRock Real Estate, the property investment management arm of one of the world's biggest private equity companies BlackRock, is on the road to raise funds for its fifth Asia-focused vehicle, according to people familiar with the matter.

The industry executives, who asked not to be identified, told DealStreetAsia that BlackRock has received commitments of between $300 million and $350 million.

"The size for the initial close [of Fund V] could be near the total fund size of Fund IV,” added one of the sources.

BlackRock Real Estate closed its fourth Asia-focused realty fund - the value-add Asia Property Fund IV - at $500 million in November 2017, half its initial target of $1 billion. The fund was fully invested by early this year.

A BlackRock spokesperson confirmed that the investment period for its "current value-add strategy has recently [been] completed." Private equity investment companies typically start raising funds for a new vehicle once about 70% of an existing fund is deployed.

The spokesperson declined to provide details about the fifth fund and would only say that the company was "on track to launch the next value-add strategy in the near future."

The Asia Pacific team at BlackRock Real Estate recently confirmed that its chief investment officer in the region, Greg Lapham, is departing the firm to pursue other opportunities. Hamish MacDonald, the firm's head of realty in Australia, has expanded his role to cover real estate investments across the Asia-Pacific region after Lapham’s resignation.

Lapham and MacDonald worked for Singapore-based private equity firm MGPA, which was acquired by BlackRock in 2013 to strengthen its global real estate business.

BlackRock's Asia Property Fund IV was its first higher-returning Asia realty fund to be launched after the MGPA acquisition. An industry source said the vehicle currently delivers a 30% internal rate of return at a 1.8-time multiple to its investors.

At the time of the MGPA acquisition, BlackRock had a $13-billion real estate investment business focused on the U.S. and U.K., with little property investments in Asia. The firm's real estate investment platform now has over $21 billion in assets under management.

Asia has emerged as the bedrock of BlackRock's overseas expansion strategy. Chairman and CEO Larry Fink wrote in a 2018 letter to shareholders that increasing the company's presence and penetration in high-growth markets, particularly in Asia and especially in China, was "one of the most critical priorities for BlackRock today and into the future."

At the end of 2018, BlackRock had $471 billion of assets under management in Asia across various strategies, including alternatives (private equity and real estate), equities, fixed income, multi-asset and exchange-traded funds.

Yet, BlackRock's property funds pale in comparison with those raised by other global investment firms.

"As the world's largest asset manager that boasts a total assets under management of over $6 trillion, BlackRock should have been raising a much larger corpus to invest in the property landscape across Asia," said an industry insider.

KKR, one of the major competitors to BlackRock, is raising its maiden Asia-focused real estate fund, with a $1.5-billion target as the firm looks to deepen its real estate portfolio in the region.

Last June, Blackstone raised $7.1 billion for its second Asia opportunistic real estate fund, surpassing its hard cap of $7 billion and setting a new fundraising record for the region. The vehicle will look to beef up its investments in warehouses and shopping malls in China, India, Southeast Asia and Australia.

DealStreetAsia is a financial news site based in Singapore focused on corporate investment activity in Southeast Asia and India. Nikkei recently announced the acquisition of a majority stake in the company.

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