Capital Markets

The private real estate industry entered Q2 on the back of the best opening quarter in recent history. Both capital raised and deal flow were strong, and helping to drive investor appetite was the fact that distributions continued to exceed capital calls by a significant margin, demonstrating that the late cycle concerns were merely about perspective. Yes, to invest in this environment still presents significant challenges when valuations are continuing to rise, but many funds are sitting on record levels of dry powder, which means not only can they act quickly but can also effectively drive negotiations for attractive assets. For those that are ready to dispose of property, the demand is there from a wide variety of participants both locally and internationally.

So…

The private real estate industry entered Q2 on the back of the best opening quarter in recent history. Both capital raised and deal flow were strong, and helping to drive investor appetite was the fact that distributions continued to exceed capital calls by a significant margin, demonstrating that the late cycle concerns were merely about perspective. Yes, to invest in this environment still presents significant challenges when valuations are continuing to rise, but many funds are sitting on record levels of dry powder, which means not only can they act quickly but can also effectively drive negotiations for attractive assets. For those that are ready to dispose of property, the demand is there from a wide variety of participants both locally and internationally.

So, has this momentum continued into Q2? In a nutshell, no. Both fundraising and deal flow are not only down on Q1 results but are also relatively weak compared to recent quarterly levels. Even without the level of $1bn+ fundraises we saw in Q1, the average fund size remained high – a reflection of the bifurcation of the fundraising market. Further illustrating this point – despite the decline in aggregate deal value – Blackstone were able to close a deal on Gramercy Property Trust for $7.6bn, representing 12% of the total quarterly value.

In yet another display of Asia’s dynamism, 2017 ended with a flurry of activity across the region that showed few signs of abating as we entered the new year. While strength is broad-based across markets and sectors, the office segment in the key markets of Hong Kong, Shanghai and Singapore has been a particular focus for investors, reflecting an improving business outlook on the back of a rebound in investment, trade and manufacturing.

The EY-IVCA Monthly PE/VC Roundup – April’19

January 2019 recorded US$1.8 billion in PE/VC investments, 49% lower compared to January 2018 and 43% lower compared to the previous month, despite a 65% increase in the number of…

The EY-IVCA Monthly PE/VC Roundup – April’19

January 2019 recorded US$1.8 billion in PE/VC investments, 49% lower compared to January 2018 and 43% lower compared to the previous month, despite a 65% increase in the number of deals on a Y-o-Y basis. This decline was mainly on account of absence of a large US$1 billion plus deal in January 2019, whereas both January 2018 and December 2018 had one large US$1 billion plus deal each. This has effectively skewed the headline number by a wide margin.

► July 2018 recorded US$1.5 billion in deal value, at par with investments recorded in July 2017. In terms of deal volume, investment activity increased by 50% to 63 deals in July 2018, compared to 42 in July 2017.

► Breaking away from recent trends, July 2018 recorded fewer large size deals. There were three deals of value > US$100 million (cumulatively worth US$402 million) in July 2018, accounting for only 26% of total investments as against a 65% investment share in June 2018.

► July 2018 recorded US$1.5 billion in deal value, at par with investments recorded in July 2017. In terms of deal volume, investment activity increased by 50% to 63 deals in July 2018, compared to 42 in July 2017.

► Breaking away from recent trends, July 2018 recorded fewer large size deals. There were three deals of value > US$100 million (cumulatively worth US$402 million) in July 2018, accounting for only 26% of total investments as against a 65% investment share in June 2018.

► The fewer number of large deals in July is no indication of a trend, as there are many mega deals in the works, the most prominent being the recently announced US$4.2 billion acquisition of Arysta LifeScience, an agrochemicals company by UPL Limited. Press reports seem to indicate that UPL is looking to part-fund this acquisition by raising funds from large PE funds.

► TPG was the most active PE investor in July 2018 and announced four deals, including a US$105 million investment in Sai Life Sciences Limited for a 35% stake, US$40 million investment in e-commerce platform Livespace and co-investments with a group of other investors in online ticketing platform Bookmyshow and an NBFC, Five Star Business Finance Limited.