CLSA keeps Fudo series alive amid senior departures – Exclusive

CLSA Real Estate is planning to launch a circa $400 million pan-Asia value-add fund, PERE has learned. The move underscores the Hong Kong-headquartered brokerage and investment group’s intention to continue running its flagship Fudo Capital funds, despite the exodus over the past year of some of its most senior executives.

According to two people who have seen the fund presentations, CLSA’s real estate investment platform is in the process of marketing the new vehicle and plans to bring it to market during the second quarter of 2019. PERE understands the fund will have the same value-add strategy as the previous three Fudo vehicles. Although the fund will have a pan-regional investing mandate, a greater emphasis will be placed on northern Asia, and especially Japan.

The fundraising attempt comes in the face of widespread market speculation about CLSA eventually winding down its successful real estate franchise. The speculation began following chief executive John Pattar’s high-profile exit in May 2018 to join global private equity firm KKR. His departure ended up triggering a ‘key man provision’ for Fudo Capital III, the biggest vehicle in the Fudo series with $1 billion raised in 2015. The investment period for the fund had to be suspended.

Since Pattar’s departure, 10 executives from the Fudo team have left the firm. According to one person with knowledge of the resignations, there were six departures in Hong Kong, two in Japan and one each in Australia and Singapore.

In January, Paul Gately – who was the firm’s regional head of asset management, head of Australia, and one of the five key persons for the Fudo series – left to join BPEA Real Estate. As BPEA’s managing director and head of asset management, he is leading the company’s foray into Australia.

In March, Takao Toma, a Tokyo-based investment manager at CLSA, left the company to join the Singaporean sovereign fund GIC as a vice-president.

The high-level departures have not been limited to CLSA’s real estate business. PERE can exclusively confirm that Randy Wilbert, the long-serving chief executive of the firm’s asset management business CLSA Capital Partners, will be leaving the firm imminently. Wilbert joined in 2009 as chief operating officer. According to the person familiar with CLSA’s inner workings, Donald Skinner, who was appointed executive chairman of CLSA Capital Partners at the start of 2019, and the rest of the senior management team are working with Wilbert on a transition plan. Skinner, a 33-year veteran of CLSA, has previously been the group COO and country head in Singapore, Japan and India.

Last month Jonathan Slone, who had been group CEO, also left the firm. PERE understands that Zhang Youjun, chairman of CITIC Securities and CLSA, has assumed the role of CLSA interim CEO.

Neither Wilbert nor Slone were investment committee members or key executives for the Fudo franchise.

According to the source with knowledge of CLSA’s plans, the firm intends to continue the Fudo series with the remaining members of the senior management team. These include head of Japan Hirotaka Uchiyama, chief financial officer Yeu Liong Ching, and head of China and Taiwan Byron Zhao. As previously reported by PERE, these three executives had been made key persons for the Fudo series, along with Gately in 2014, ahead of Fund III’s close. The Fudo team is understood to have a team of 20 people based in Hong Kong, Singapore, Tokyo and Sydney.

There is, however, an element of reset with the latest fund in terms of size. If the new vehicle succeeds in raising $400 million, this will still be substantially less than the $1 billion raised for Fudo Capital III and the $815.8 million collected for Fudo Capital II. The debut fund – the 2005-vintage Fudo Capital – had a smaller target of $350 million, but ended up closing on $430 million, according to PERE data.

Fudo Capital III is thought to retain three portfolio assets. The firm has made two exits from the fund in recent months: a Japan retail asset and Robinson 77, a Singapore office building it acquired for S$530 million ($392 million; €346 million) in 2016. In the middle of last year, the firm put Robinson 77 on the market. According to media reports, Hong Kong-based private equity real estate firm Gaw Capital acquired the property for around S$710 million in February.