ARA Asia fund raises $US1.13bn

INVESTMENT capital is flooding into Asia despite the global credit crunch, ARA Asset Management has closed its third and final flagship ARA Asia Dragon Fund raising $US1.13 billion.

The fund has raised in excess of $US1.13 billion and together with additional allocations of $US500 million for potential coinvestments with the ADF by a major investor, the fund has more than $US1.6 billion of equity capital at its disposal, representing potential real estate investment capacity of over $US5 billion.

ARA Group’s chief executive John Lim said the fund attracted a broad range of investors including public pension funds, foundations and other global institutional investors seeking to invest in a diversified portfolio of real estate investments in Asia.

ARA Asia Dragon Fund is a private real estate fund with a mandate to invest across Asia with a primary focus on the main cities of China, Singapore, Hong Kong, Malaysia and a secondary focus in key cities in Taiwan, Thailand, Vietnam and other rapidly growing economies in the region.

“This is by far the largest private fund we have raised to date and the response from investors has far surpassed our initial expectations, reflecting their confidence in ARA and our strong track record of real estate investment and asset management.”

“To date, the fund has invested in real estate with a gross asset value in excess of $US800 million and is actively working on deals in Hong Kong, China, Singapore, Malaysia, Vietnam and Taiwan,” he added.

“We are currently seeing very interesting investment opportunities in the region with more realistic asking prices from asset owners in the wake of the tighter global credit environment and concerns over a US slowdown affecting global growth,” ADF’s fund director Anthony Ang said.

“Notwithstanding the current weaker market sentiment, we are cautiously optimistic of prospects for the region and remain positive on the long-term growth outlook for Asia. With the experience and expertise of ARA, we are confident of delivering superior returns for the investors in the ADF,” Ang concluded.

ARA’s feat comes hot on the heels of Macquarie Global Property Advisors which recently raised $US5.2 billion for its MGPA Fund III.

Earlier this month, a report titled “Real Estate Investment in Asia Pacific: Migrating capital” by KPMG, FTSE Group and the Asian Public Real Estate Association found Asia is recording strong inflows of capital as Europe and United States feel the bite from the global credit crunch.

The report observed the inflow of capital to Asia’s real estate market is accelerating off the back of a prolonged period of steady growth which is powered by a combination of opportunistic and increasingly longer-term investments.

The report findings give an optimistic outlook for Asia in 2008 where returns are projected to remain higher than the global average for the coming year and are backed by strong market fundamentals and even stronger economic growth.

KPMG China and Asia Pacific’s partner in charge of property and infrastructure Andrew Weir said despite the current tightening of credit from banks, the deals will continue to happen.

“However, the current sub-prime fall out elsewhere may well act as a catalyst for the inevitable further development of Asia Pacific as a centre of property and investment management,” he continued.

APREA’s chief executive Peter Mitchell said many REITs in Asia should continue to deliver good returns for the remainder of the year.

“There is no doubt that market sentiment in Asia has been affected by the US credit crisis, and there is uncertainty about when a rebound will occur.

“However, over the longer-term, outlook should remain positive in the region, with REITs generally being good defensive stocks and inflation hedges. Projections show Asia’s REIT market exceeding a market capitalisation of $US100 billion by 2010,” Mitchell added.

Australian Property Journal