Angelo, Gordon Wins $100 Million Oregon Investment for Asian Property Fund

Angelo, Gordon & Co., the manager of $23 billion of investments in fixed income, real estate, buyout and hedge funds, won a $100 million pledge from Oregon’s state pension for an Asian property fund.

The Oregon Investment Council, which oversees about $65 billion in retirement accounts for state workers, voted today to invest in the $600 million AG Asia Realty Fund II LP. Most of the fund’s investments will be in China, while Japan will get about 30 percent and South Korea 10 to 15 percent, said Keith Barket, senior managing director for Angelo, Gordon.

“In the next 20 years, emerging markets will outpace world growth and the U.S. will underperform,” Barket told the council during a meeting today in Tigard, Oregon. China is “in the early stages of its growth,” and offers more profitable opportunities for real estate development than the U.S. does, he said.

Oregon’s investment will come from the state Public Employees Retirement Fund, the largest pool the council oversees.

Angelo, Gordon has invested in Asia since 2005. The New York-based firm’s first Asia fund, a $526 million vehicle, put about 85 percent of its capital in China and 15 percent in South Korea, Barket said. The firm uses about 30 percent debt to finance its properties in the region.

Angelo, Gordon in March sold a mixed-use development in Dalian, China, that it bought in 2007 for a net profit of $41.7 million, according to a document prepared by the firm. Also in 2007, Angelo, Gordon bought a warehouse and office development in Chengdu, China, and expects a return of about double its $18 million investment.

Fundraising

Property prices in 70 Chinese cities rose 11.4 percent in June from a year earlier compared to 12.4 percent in May, according to statistics bureau data.

China overtook Hong Kong as the world’s hottest housing market in the first quarter, with prices rising at more than double the rate anywhere else, according to property adviser Knight Frank LLP. The government on July 12 vowed to enforce measures to dampen the market that include a ban on loans for third-home purchases, higher mortgage rates and tighter down- payment requirements for second home purchases.

The firm likely will be done raising money for the new Asia fund next month, Barket and his colleague Aliana Spungen said in an interview after the council’s meeting.

“I’ve known Angelo, Gordon over the years domestically and they have a very good fundamental approach to real estate investing,” Brad Child, Oregon’s senior investment officer for real estate, told the council after the presentation by Barket and Spungen.

U.S. Assets

In the U.S., Angelo, Gordon has been buying real estate- related assets for the past year, Barket said. The firm raised $2 billion for U.S. investments in 2006 and 2007 and was a “net seller” from 2006 through early 2009, he told the council.

China is better than the U.S. for real estate investments, Barket said. Housing prices in China have been rising 5 1/2 percent annually for the past decade, and disposable income is growing 13 percent a year, making homes more affordable, he said.

“In China, when we build, we usually have a 50 percent profit margin,” Barket said. “The need for new housing, retail and logistics is tremendous. We’re looking to meet that need.”

To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net

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