Property investment funds aims to offer Asian investors the chance to buy into Oz and New Zealand

Written by Ray Clancy

Tuesday, 31 August 2010 09:06

A global property fund management plans to raise about $1 billion in two funds focusing on real estate in Australia and New Zealand, it has been announced.

New Zealand-based Du Val is seeking investors in Asia after launching its NZ$250 million Mid-Market Fund and plans to launch another in November called the Opportunity Fund that would raise NZ$1.1 billion.

As some parts of Asia such as China are facing asset bubble risks, markets such as New Zealand and Australia offer a more stable alternative because of steady, less volatile growth, it says.

‘If you are a property investor, and most Chinese love property, the question is how can you leverage China’s growth but mitigate your exposure to the Chinese property market,’ said William Nobrega, managing partner at Miami-based The Conrad Group, which is advising Du Val on the funds.

‘What we came up with is, you invest in property in New Zealand and Australia. They are both economies benefitting from the growth and their exports to China are surging,’ explained Nobrega.

Du Val, which is in talks with Singapore’s Kim Eng Securities to distribute its fund in Asia, is targeting an internal rate of return of at least 20% annually for the fund as it looks to acquire real estate trusts trading below net asset values.

Du Val’s strategy is to take the listed REITs private, value add the underlying assets with an aim to taking them public again eventually. A portion of the funds will also be invested in physical commercial properties.

‘What happened was investor confidence dropped, and as a result the share prices of those listed companies also dropped. So you can look to acquire some of those portfolios at 20 to 30% off the net asset value,’ said Jason Smith, Du Val’s co-founder and managing director.

Du Val, which was set up in 2009, will target investments in New Zealand for the Mid-Market Fund, while the Opportunity Fund will invest in New Zealand and Australia properties. Both are closed-end funds.

The Mid-Market Fund had so far attracted interest from high net worth individuals and financial institutions in Asia, Smith and Nobrega said.

Du Val hoped to market the bigger Opportunity Fund to sovereign funds in Asia and investors in Europe, they said.