Angelo, Gordon & Co., a real estate, private equity, distressed and hedge fund asset manager founded by two former L.F. Rothschild bankers, is seeking as much as $1 billion for its second Asia-focused property fund.
The New York-based manager of $14 billion aims to raise in the first half as much as twice the amount fetched by its first Asia property fund, Hong Kong-based managing director Wilson Leung said. The fund will focus on investments in Japan, China, South Korea and Southeast Asia.
Angelo Gordon is planning new investments in the region as cash-strapped developers and other investors, including funds managed by investment banks, sell assets at discounts. Chinese developers, which hoarded land holdings in previous years and are now unable to tap stock markets and banks for money, are selling assets at lower prices to pay off loans and finance construction.
‘You are seeing a dramatic drying up of that liquidity that was previously provided by both local banks and international investment banks,’ said Leung in an interview. So we are now seeing a lot of distressed opportunities.’
Investors in Japan, who took on high levels of debt to finance investments in the world’s second-largest property market between 2004 and 2007, are suffering after the financial crisis slashed property prices and lending to the market evaporated, Leung said.
A survey by London-based data provider Preqin Ltd. yesterday said 84% of private-equity-type real estate investors would make such investments in 2009, while 59% currently allocate less money to the industry than they’re allowed to, and 38% of those surveyed expect to have less money to invest in such funds after their total assets value fell.
Angelo Gordon’s so-called opportunistic real estate funds typically buy assets that are either distressed or need significant improvements. It then works with local partners to turn them around by developing or renovating the projects to stabilize revenue before selling them, said Leung.
Blooomberg reported the company has made about $700 million of real estate investments in Asia since 2005. Its first Asia-dedicated property fund raised $526 million in 2006, and invested about 80% in projects in China, and the rest in South Korea.
In China, Angelo Gordon likes residential projects in medium-sized cities, such as Dalian, Shenyang, Wuxi and Chengdu, where prices have risen less than in bigger urban centers, and sales are mostly to end users instead of speculators, Leung said.
It also favors industrial assets, such as warehouses tailor- built to meet the needs of tenants already signed up, he added.
‘We still think it’s one of the best-positioned markets to get out of the global recession,’ said Leung, citing the country’s higher economic growth, low consumer debt levels, high savings rates and increasing demand for housing.
The New York-based asset manager was founded about 20 years ago by Chief Executive Officer John Angelo and Chief Investment Officer Michael Gordon. It has made more than $10 billion of real estate investments since its entry into the U.S. market in the early 1990s, according to Leung.
Both of Angelo Gordon’s Asian funds will target a 20% annual return after fees.