BPEA Real Estate is a part of Baring Private Equity Asia (BPEA), one of the largest independent alternative investment firms in Asia. Founded in 1997, BPEA has a 24-year track record of investing across Asia and today has $34bn of assets under management. BPEA employs over 210 people and operates from nine regional offices located in Beijing, Delhi, Hong Kong, Los Angeles, Mumbai Shanghai, Singapore, Sydney and Tokyo.
As one of the few Asia headquartered private real estate managers with a pan-Asian footprint and capabilities, we take an integrated and holistic approach to investment opportunities across the region that leverages our pan-Asian platform and focuses on market segments and opportunity. Through detailed analysis of historical values, replacement cost and the balance between demand and supply, we seek to identify where a particular sector in a specific country is in the context of the broader real estate cycle. BPEA Real Estate seeks to generate attractive risk-adjusted returns with a strong focus on capital preservation by constructing well-diversified portfolios of multi-strategy private real estate investments across the Asia Pacific region.
BPEA Real Estate has a dedicated team of 26 real estate specialists with an average experience of 20 years and is led by Mark Fogle, who has been investing in Asian real estate since 1992. Collectively the team has invested over $5.7bn of capital across 127 Asian core, value- add and opportunistic debt and equity transactions.
We prepare an annual House View, which guides our investment strategy through in-depth research-driven sector analysis. This allows us to generate attractive opportunistic returns with lower levels of risk at any point in the real estate cycle by identifying the most attractive sectors in the context of the broader market. Our current focus areas are: hospitality, structured debt, logistics, and corporate dislocations.
LOGISTICS: The Asia Pacific logistics sector is at the beginning of a long-term growth cycle, underpinned by a structural shift from offline to online retail. The adoption of e-commerce in Asia – both as a supplier and a source of domestic demand – places the region at an advantage over other parts of the world, yet many countries do not have a sufficient supply of modern logistics facilities.
China stands out as an attractive destination due to its rate of urbanisation and increasing domestic consumption; however, restrictive government land control continues to result in a significant shortage of modern logistics facilities, with 95% of China’s existing stock facilities still considered substandard. The COVID-19 pandemic has increased the attractiveness of the sector by expediting the shift to online, combined with government initiatives to remove wet markets and substandard logistics facilities.
We see similar supply-demand dynamics in other Asian markets and believe that Asia’s logistics industry is at the beginning of a multi-decade transformation.
HOSPITALITY: We had taken a cautious view towards the hospitality sector before the onset of COVID-19 and, as a result, we entered the crisis with no exposure to the sector. We have since seen increasingly attractive opportunities to take advantage of the COVID -19 driven dislocation, especially in Asia, where international tourism is expected to take longer to recover to pre-COVID levels. We expect COVID -19 driven uncertainties will impact investment decisions in the sector. However, with the lenders’ forbearance posture waning, decreasing the availability of financing, we expect valuations to moderate from the 2019 highs to more reasonable levels. Furthermore, we believe that there will be opportunities to capture pockets of domestic demand-led recoveries in markets such as China, Japan, or Australia while international tourism recovers.
STRUCTURED DEBT: The extended COVID -19 pandemic has caused stress across many developers and lenders, in particular with regional banks that expanded aggressively across new geographies and sectors (such as hospitality) pre-COVID. Government stimulus and support have delayed the inevitable stress, however as governments now gradually start to withdraw their stimulus packages and incentives, we believe pressure on these lenders will increase. Similarly, many credit funds raised pre-2018 that made legacy loans with high LTVs may soon require refinancing or other solutions. We, therefore, see oppor- tunities to increase our exposure to real estate debt in 2021 and into 2022.
OFFICE: The COVID-19 pandemic has impacted occupancy levels in many of Asia’s core gateway cities, which presents an opportunity to increase exposure to the sector and benefit from the longer-term recovery.
We believe the pandemic will increase tenants’ focus on the availability of wellness features – such as more space per employee, green space, and ventilation – especially in larger, more developed cities, providing value-add opportunities. In China, increased demand from tenants seeking to shift towards more spacious office parks, away from dense CBD buildings, is a broader trend that underpins our focus on suburban value-add properties in submarkets with favorable supply and demand dynamics.
In Asia’s developing countries, cost-cutting is likely to lead to increased outsourcing demand which will have a positive impact on the underlying demand. In the Philippines, we have been investing in BPO office buildings where demand continues to benefit from the global outsourcing trend.
RESIDENTIAL: We remain cautiously optimistic about the luxury residential market, especially in Hong Kong and Tokyo, which has proven to be highly resilient. In the medium term, we expect to see more COVID-19-driven opportunities from distressed owners of high-quality assets. Our flexible approach towards buying residential – such as through buying and developing land, buying en bloc, or provide structured debt to developers or other investors – provides an opportunity to continue investing through the cycle.
RETAIL: We had no exposure to the retail market before COVID-19. The traditional retail environment continues to be challenged by the broader structural shift from offline to online retail. COVID-19 has expedited this transition, and we believe the impact of the pandemic will persist in the longer term and further decrease the attractiveness of the sector
Investment principles & strategy
Our investment philosophy is based on six key investment pillars.
- Multi-Market Strategy
- Research-Driven Brick & Mortar Focus
- Low Leverage
- Focus on Post-Investment Value Creation
- Operating Partners
- Liquidity and Multiple Exit Paths
We run two investment strategies on behalf of our investors:
Pan-Asian Fund Program
BPEA Real Estate seeks to generate opportunistic returns by investing in a well-diversified portfolio of private real estate investments across the Asia Pacific region. The firm is currently investing from the $1bn BPEA Real Estate Fund II.
Chinese Logistics Co-investment Platform
BPEA Real Estate is capitalising on the strong underlying demand and critical undersupply of modern logistics facilities in China through Forest Logistics, a logistics property development and operating platform with with logistics projects located at various key gateway cities across China. The fund is currently investing $1.2bn of capital and intends to acquire and construct approximately 30 logistics sites with a combined GLA of more than 2.5m sqm (26.9m sqft).