The California Public Employees’ Retirement System (CalPERS) today announced a $500 million investment commitment to the new real estate ARA Asia Dragon Fund.
The Fund is sponsored by ARA Asset Management, a member of the Cheung Kong Group, one of the leading real estate companies in Asia. ARA has $4.7 billion under management and publicly-traded real estate investment trusts (REITS) in Hong Kong, Singapore, and Malaysia.
In addition to the $500 million commitment, CalPERS also allocated $500 million for potential co-investment opportunities with the ARA Asia Dragon Fund, which will invest in private real estate. The Fund anticipates approximately $1.5 billion in total commitments by CalPERS and other investors not including co-investment allocations. Its target annualized net return on investment is 18 percent.
“This Fund is providing us an opportunity to play a bigger role in Asia, which has one of the fastest-growing economies in the world,” said Rob Feckner, CalPERS Board President. “Its primary focus will be on office, retail, and residential properties in the key markets of Singapore, Hong Kong, Malaysia, and China, where the underlying strengths of the real estate markets are strong and growing.”
The ARA Asia Dragon Fund will limit its investments in any one country to no more than 50 percent of its total commitments. No more than 25 percent of the investments in the Fund will be in China. Investments will focus on residential development projects in major cities of high urbanization and population growth, in commercial development projects, and in underperforming assets in good locations.
“ARA is a best-of-class real estate manager offering us a door of opportunity,” said Charles P. Valdes, Chair of the CalPERS Investment Committee. “Its strong investment sponsor is Cheung Kong Holdings of Hong Kong, one of the largest real estate development companies in Asia with a market capitalization of approximately $104 billion.”
CalPERS currently has approximately $3 billion of its real estate investments, commitments, and allocations in Asia, including this new relationship with the ARA Asia Dragon Fund. The pension system’s global real estate program has approximately $34 billion in investments, commitments, and allocations, including approximately $20 billion in total market value of investments. CalPERS Asia real estate investments generated a one-year, after-fee return of 27.8 percent as of December 31, 2006.
“This commitment to the ARA Asia Dragon Fund is a strategic step as we restructure our program to respond to market opportunities into the next decade,” said Ted Eliopoulos, Senior Investment Officer, CalPERS Real Estate. “There’s a large investment opportunity universe outside the U.S. in which we intend to increasingly participate. This Fund is a member of the Cheung Kong Group, which is a dominant player in every real estate sector – including housing, office, retail, industrial, and infrastructure.”
CalPERS is the nation’s largest public pension fund with assets totaling more than $250 billion. The System provides retirement and health benefits to approximately 1.5 million State and local public employees and their families. For more information about CalPERS, visit www.calpers.ca.gov.
