PAG set to close on $2.25bn for its biggest Asia RE fund – Exclusive

The private equity real estate firm is set to surpass its $2bn original target.

Hong Kong-based investment manager PAG is planning to hit the $2.25 billion hard-cap in July or August for its latest pan-Asia core-plus/value-add commingled real estate fund, PERE can reveal.

PAG declined to comment on fundraising but PERE understands that PAG Real Estate Partners II will exceed its $2 billion original fundraising target in its final close. This will make it the firm’s biggest pan-Asia commingled vehicle across different strategies.

One source told PERE that the fund has deployed around $650 million so far. The fund was understood to have raised around $1 billion in August last year, according to a PERE report. The fund follows the same investment strategy as its predecessor PREP, to invest in gateway cities where the firm already has a demonstrated track record. The target assets of the fund are predominantly office, with multifamily in Japan, according to PERE sources.

The only difference between Fund II and its predecessor is that Auckland has been added to the mandate of Fund II, with at least two office deals being done in the city’s central business district, according to the source.

With an ‘eight-plus-two’-year fund life, PERE has learned that the fund is seeking a 10 to 13 percent net return target, the same as its predecessor. Fund I has achieved a net return of circa 15 percent, according to a source.

Park Hill remains the placement agent for the fund series, bringing in up to 10 percent of total equity raised for Fund II, according to sources. It is understood that most of the fundraising has been done by PAG’s internal team.

Fundraising momentum continues to be strong for PAG’s real estate fund business. PREP I was closed at $1.3 billion in 2016, exceeding its $1 billion initial target, while Secured Capital Real Estate Partners VI, the firm’s flagship opportunistic fund, pushed past its $1.7 billion hard-cap and closed at $1.9 billion in 2017, according to PERE reports.