MGPA reaches first close on real estate fund

Whereas MGPA's first three funds have concentrated on acquiring assets requiring heavy refurbishment and development - often including buildings which are unlet or have very low occupancy, which they then lease and reposition - Asien Spezialfonds will largely buy buildings that are already let, reposition them and collect the yield from rental and management income.

"The fund will focus on buying things that either have an existing yield or that you can create a decent yield from very quickly," MGPA's Asia CEO John Saunders tells AVCJ. "You're taking a lot less risk in the process but you'd typically expect to get around a 5% yield and a 10-12% IRR rather than the 17-20% IRR and 1.8x equity multiple that you'd get from an opportunity fund."

Despite the lower return expectations, MGPA believes Asien Spezialfonds constitutes an opportunity to take advantage of the strong pipeline of core-plus real estate deals available. Regulated under German investment laws, it will focus on established markets such as Japan, Australia, Hong Kong, Singapore and Malaysia, with a particular interest in the office and retail sectors. Ticket sizes are likely to oscillate between $40 million and $100 million.

The German-based vehicle - which, unusually, is principally targeting investors in German-speaking countries - has so far received commitments from three German institutions towards its target of EUR500 million. Two of these investors contributed substantially more than the third. Placement agent Selinus Capital is helping to shore up funds, with minimum subscriptions in the $20-25 million range.

As LPs will be able to enter the vehicle under equal terms at any point in the investment cycle, the lifespan of the fund is as yet underdetermined but is likely to be in excess of 10 years. Up to five fund closes are expected in total, with the second forecast for later this year and the final close anticipated in 2013.

MGPA has operated in Asia since 1999 and has 13 offices across Asia-Pacific and Europe. Asien Spezialfonds will be mainly managed from Hong Kong.

In June 2008, the firm closed its third Asia fund at $3.9 billion, nearly $3 billion more than its predecessor, which was launched in 2005. The vehicle invests in offices, retail, residential, logistics and hotel properties.

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