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Ride the Forthcoming Wave of Growing APAC Private Equity Funds' Investment Activities

blog CMIS the forthcoming wave of private equity funds disposals 3x2 v4

Transactional activities by this group of investors is expected to increase in the coming years, opening up a plethora of opportunities.


Private equity (PE) funds focused on Asia Pacific (APAC) investments have become the most prolific real estate investor in the region.

In fact, the share of APAC real estate acquisitions by these funds has expanded from around 15% ten years ago to more than 25% over the past three years.


Funds on a hunt for opportunities but sell-side activity to ramp up in coming years


This comes as no surprise, as capital-raising has reached new highs in the recent years, and liquidity held by the PE funds is currently at a swelling record level of more than US$45 billion.

With bounteous liquidity, these funds have been net buyers of real estate assets every year over the past decade, except for 2014. This implies that they have consistently acquired more real estate assets than they had disposed of.

As the assets under management (AUM) of PE funds continue to grow, activity on the sell-side is also expected to accelerate dramatically in the years to follow.

Asia Pacific Private Equity Funds Net Investment
 

Interesting factoids about PE funds and real estate investments


  • Around 50% of PE fund assets are disposed within a two-year window, between 6 to 8 years after acquisition; this corresponds to the typical lifespan of many PE funds.

  • Among the assets acquired by PE funds in the last 4 to 6 years, between mid-2015 and mid-2017, over 90% are still within the investment portfolio.

  • This large pool of assets will enable incoming investors to identify their future acquisition pipeline, given the high probability of asset disposals in the next two years, if PE funds dispose their holdings at rates that are in line with historical trends.

  • It is, however, interesting to note that PE funds that have acquired real estate assets 2 to 4 years ago have already disposed close to 30% of their assets, partly due to more opportunistic or value-add investors rolling out faster buy-fix-sell strategies, especially in Japan.

What the future of PE funds implies for investors


At Colliers, we also study the establishment years (vintages), capital-raising volumes and fund maturity years of PE funds. Here are some insightful trends investors should look out for:

  • Between 2022 and 2024, around 160 PE funds with a primary investment focus on Asia Pacific will mature.

  • These funds have raised more than US$50 billion in equity. When considering asset appreciation and the use of leverage and asset enhancements; we expect more than US$120 billion in asset sales to take place over the next three years.

  • With transactions starting to gather momentum, the next two years will be an opportune time for asset disposals for PE funds. Liquidity from institutional capital targeting real estate assets will continue to build; however, PE funds will need to rethink their disposal strategies in order to maximise returns.

  • Colliers have been actively analysing the asset holdings of PE funds, and we have been working closely with these firms on their acquisition and divestment strategies. We are also looking to marry these strategies with the investment plans of other institutional investors.

 

For a more detailed analysis of private equity funds and their disposal pipelines, reach out to our Capital Markets & Investment Services experts.

 

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Terence Tang

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A veteran in the real estate industry, Terence has more than 30 years of experience in principal real estate investment management and advisory services. Over the years, he has undertaken more than 150 real estate transactions, with a combined value of over USD12 billion – spanning different sectors across Asia.

At Colliers, Terence helms the Capital Markets & Investment Services Asia business, which is made up of a team of more than 130 senior Investment Services executives across the region.

Prior to joining Colliers, Terence was with Invesco Real Estate Group, where he was the Head of China before relocating back to Singapore to assume the role of Head of Southeast Asia.

Before Invesco acquired the Asia Pacific real estate fund management platform of AIG in January 2011, Terence was the Managing Director of AIG Global Real Estate Group, overseeing the real estate business in Greater China.

Prior to AIG, Terence led deal sourcing, evaluation, negotiation, due diligence, and acquisition of deals in Asia for the Government Investment Corporation of Singapore (GIC) as Senior Vice President, Investment & Asset Management. He also led the Asia Assets Restructuring Group, overseeing and ensuring improved asset performance for various commercial buildings in Asia Pacific.

Terence was formerly the Head of China Investments with Jones Lang LaSalle (JLL), where he was instrumental in setting up and heading the business unit. Earlier in his career, Terence was also the Managing Director of JLL Singapore before he left to join GIC Real Estate.

Terence is a frequent speaker at several real estate conferences, some of which include ANREV, Private Equity Real Estate (PERE) Asia Summit, China Global Real Estate Institute, Deutsche Bank Access China, Real Estate Investment World, and Vision Insights and Perspectives, among others.

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