Victor Yeung, a former managing director of LaSalle Investment Management with $47.6 billion of property assets globally, started his own fund targeting the growing Asia-Pacific real estate investment trusts.
Yeung’s Hong Kong-based Admiral Investment Ltd. is seeking $200 million from institutions and wealthy individuals by year-end for the regional REIT fund, Yeung said in an interview. Admiral is in talks with a “big institution,” which could provide investments that would take it close to that amount, he added, declining to identify the investor because the discussions are private.
Admiral started the fund this week following government encouragement and regulatory changes after the 2008 global financial crisis spurred more REIT listings in the region and eased concerns that the market isn’t liquid enough, Yeung said. The number of REITs in the region hit a record of 129 at the end of last year, with a combined market value of $226.3 billion, according to Asia-Pacific Real Estate Association and index provider Global Property Research.
“An Asia-Pacific product didn’t really make sense until fairly recently,” he said. “Clients want to be able to do the allocation so that they can capture the growth.”
Some investors are interested in farming out money to regional REIT funds and most large firms only offer global products so far, Yeung added.
The Admiral fund targets to generate a double-digit annual return over the medium term, including annual yield and capital appreciation each in the mid-single digit, Yeung said.
As much as 20 percent of the assets in the fund can be invested in indexes of real estate stocks and bonds, he added. The fund’s performance will be benchmarked against the Thomson Reuters GPR/APREA Investable REIT 100 Index started last year.
Yeung spent seven years with LaSalle Investment, helping manage regional holdings for its real estate securities team, which oversees about $10 billion of assets worldwide, before he left in April last year, according to Admiral’s website.
Twenty-one REITs raised $7.5 billion in the Asia-Pacific region last year, approaching the combined number raised in the previous two years, according to data compiled by Bloomberg.
REITs are required by regulators in most jurisdictions to pay out much of their income as cash dividends to investors, making them more attractive for institutions looking for stable cash flows to finance liabilities such as pension funds and insurance companies, Yeung said. The Bloomberg Asia REIT Index is estimated to generate annual dividend yield of above 5 percent this and next year.
REITs are also more transparent than property stocks and the valuation of REITs is more tangible, Yeung said. Japan removed certain rules that had restricted share buybacks by REITs and curbed their mergers and acquisitions after the 2008 global financial crisis, Yeung said.
“After that, you have a lot of small REITs combining with each other to create stronger and larger REITs,” he said.
Nippon Prologis REIT Inc. (3283), a trust set up by Prologis Inc., the world’s biggest warehouse owner, raised 105.3 billion yen ($1 billion) in an IPO in February 2013.
In Australia, Yeung likes REITs focused on big cities such as Sydney and Melbourne, especially malls. With the end of the commodity-fueled boom and weakening currency, he is expecting a reversal of the trend in past years of Australian ordering goods from international retailers online, hence boosting office and retail rental prices in big cities.
The market value-weighted gauge Bloomberg Asia REIT Index that tracks 100 trusts in the region declined 1.6 percent last year after a 28 percent gain in 2012, as expectations that the U.S. monetary stimulus will end pushed Treasury yields higher.
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