SEB Asset Management is driving forward its strategic expansion in Asia’s real estate markets by launching its first Asian real estate special fund. The 'SEB Asian Property Fund SICAV-FIS' (LU0304382566) is 100% invested in the Far East.
The fund's first property is an office tower in Shanghai that was acquired in a 50/50 joint venture with Pacific Star. The fund has a target investment volume of approximately 750 million and an external financing rate of up to 60%. Its planned equity volume is 300 million to 350 million. The fund is already almost fully placed, according to information provided it.
The SEB Asian Property Fund SICAV-FIS pursues a 'core plus' strategy in the lower to medium range of the risk spectrum, while the target properties will be in the core to value-added spectrum. SEB is forecasting an internal rate of return (IRR) of approximately 9% p.a.
In the next 36 months, the fund intends to establish a broad-based portfolio consisting of office, retail, logistics and residential properties, primarily in China, Japan, Korea and Singapore. In addition to core and core plus properties, it aims to acquire development projects, which will comprise up to 40% of the fund volume, in order to optimally profit from the region’s high growth.
The fund’s target group includes institutional investors such as insurers and pension funds. These investors value the fund’s eligibility to serve as coverage fund assets, which ensures that their investments in it are counted towards their real estate ratio. In addition, professional investors as defined by the Luxembourg Special Funds Act, such as family offices, are permitted to invest in the fund. The minimum investment per investor is 5 million.
The new real estate special fund will take the legal form of a Luxembourg SICAV. The new Luxembourg Special Funds Act promulgated in February 2007 provides greater scope with regard to the selection of properties and to methods of acquisition and finance than is the case with German special funds. According to SEB’s real estate managers, the acquisition of properties via multi-tier holding structures and a 60% external financing rate are two key criteria for efficiently structuring the portfolio. “In the same way as the multi-tier acquisition structure reflects international standards and is commonplace in Asia, the external financing rate is often crucial for the acquisition of suitable investments,” explained Choy-Soon Chua, Managing Director of the SEB real estate investment company.
New German real estate fund to follow shortly
SEB is expecting a jump in demand for indirect real estate investments, primarily from pension funds and insurers that have previously had below-average investments in real estate and that want to systematically optimize the risk/return profile of their portfolios using indirect real estate investments. “This means it is not difficult to predict shifts in traditional portfolios – also or precisely because real estate is steadily growing in importance as an asset class in the context of risk diversification and asset/liability management,” said Barbara Knoflach, CEO of SEB Asset Management AG.
SEB intends to leverage this market potential by offering further innovative real estate capital market products and to maintain its strong position as a real estate manager with institutional clients as well in the long term. Among other things, it will launch another real estate fund that targets 'German real estate with a value-added profile' for foreign pension funds before the end of the year.
SEB Asset Management has been active in the real estate segment since 1989 and currently manages around 7.2 billion in three mutual funds. The total volume under management including funds of funds, advisory and discretionary mandates is around 20 billion.