Fundraising - APRIL 15, 2014

Invesco markets first commingled core fund with focus on Asia Pacific

by Reg Clodfelter

Invesco Real Estate is currently marketing its first ever commingled core real estate fund focused on the Asia Pacific region, the Invesco Real Estate Asia Fund.

The open-end fund, which has already raised $400 million from six founding investors, will target core/core-plus office, industrial, residential and retail properties with an emphasis on office properties. It will invest across Asia with a focus on Australia, China, Hong Kong, Japan, Singapore and South Korea, and is expected to make its first two or three investments in Japan and Australia to build a stabilized portfolio.

Investments will average $80 million to $150 million with leverage no higher than 60 percent. Fund-level leverage will not exceed 40 percent. Minimum LP investment size in the fund is $10 million, and gross returns are expected to be in the 9 percent to 11 percent range. An initial close is expected by June 30.

Invesco has committed $75 million of bridge capital to the fund, which will be bought out at cost by future commitments. Following this buy-out, the firm will no longer have capital committed to the fund, which is standard for Invesco core real estate funds and is typical of open-end core funds.

Investment restrictions for the fund include investing no more than 25 percent of the fund in a single investment and no more than 30 percent of the fund in a single country. Additionally, 20 percent or less of the fund will be invested in China (excluding Hong Kong) and in value-add projects.

The fund, which will be managed by Graeme Torre, a Hong Kong–based managing director at Invesco Real Estate, will look to take advantage of broad demographic and economic trends in Asia. Specifically, the fund will look to take advantage of GDP growth in Asia that will outpace the rest of the world, bringing the continent’s share of world GDP from 34 percent to 40 percent by 2025, according to an investor’s due diligence documents on the fund. This growth has already translated strongly to commercial real estate, as Invesco Real Estate notes that, since 2001, the Asia Pacific REIT market has grown more than 2,700 percent.

Additionally, though overall population growth may be modest, rapid urbanization in many Asian countries is expected to boost long-term real estate returns.

The fund is expected to focus on larger cities in the region, such as Brisbane, Hong Kong, Melbourne, Perth, Seoul, Singapore, Sydney and Tokyo, as they should provide greater liquidity and transaction volume than other urban areas, and may outperform smaller cities or suburban markets, according to the due diligence documents.

The fund is also expected to provide strong geographic diversification benefits to U.S. investors as “GDP growth rates and real estate performance (using listed real estate as a proxy) have shown low correlation historically between the US and Asia according to research performed by the Manager,” the due diligence documents state.

As of Dec. 31, 2013, Invesco Real Estate has 18 offices in 12 countries and $55.7 billion in assets under management. Invesco Real Estate Asia currently manages $4.9 billion of assets divided between 32 properties in seven markets and three property sectors.

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