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Carlyle Raising $1 Billion Asia Property Fund: Sources

31 March, 2009

The Carlyle Group is raising its second Asia real estate fund with a target of $1 billion in a move to tap more property deals in key markets like China and Japan, sources with direct knowledge of the plan said on Monday.

More than half of the capital, or over $500 million, for the fund, which will be called Carlyle Asia Real Estate Partners II, has been committed by its global institutional investors, the sources told Reuters.

“The market is very tough so it is certainly not an easy thing to get the target that you want,” said one source.

“Now, it is good to see the fund-raising thing is almost done,” he said, adding the new fund is expected to be launched in the second half of this year.

The sources declined to be identified as they were not authorized to speak to the media.

A Carlyle spokeswoman in Hong Kong declined to comment.

In August 2005, Carlyle, the Washington D.C.-based U.S. private equity firm, raised $410 Million for its first Asia Real Estate fund, with a focus on major Asian economies including China, Japan and South Korea.

The first real estate fund, which purchased several high-end residential and commercial projects in top Asian cities, such as Shanghai, Tokyo and Seoul, in the past few years is almost fully invested, said the sources.

Property markets around the world are falling as the global financial crisis deepens.

With banks cutting their exposure to property, landlords in Japan, China, India, Australia and other countries could be forced into firesales if they fail to refinance loans, putting more properties on the market and driving values down further.

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Some property investors are already calling 2009 a special “vintage,” offering cheap assets that they hope will produce juicy returns when Asian economies rebound from the global financial crisis.

Competition for good properties may be easing as many hedge funds, which dabbled in Asian property recoil from the market, struggle to get more capital.

To raise a new property fund for more deals, Carlyle is not alone.

Morgan Stanley aimed to raise $10 billion for Morgan Stanley Real Estate Fund VII Global, the latest in a series of its global property investment funds, Reuters reported in September.

Other China-focused private equity funds, such as FountainVest, backed by Singapore’s Temasek Holdings, have also said Chinese property sector, would be one of their investment focuses for the next few years.

“You can’t wait until the market is back. You have to take action and get prepared for the market is really back or it will be too late,” said another of the sources.

Besides real estate, Carlyle also manages buyout, venture and growth capital funds to invest in a wide range of sectors across Asia.


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Carlyle Raising $1 Billion Asia Property Fund: Sources

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