RREEF earmarks a third of funds for Asia

RREEF, one of the world's biggest property fund managers, will spend at least 30 percent of its future private equity funds in Asia, with Japan, China and India its favourite markets, an executive said on Monday.
Speaking at the Reuters Real Estate Summit in Singapore, RREEF's Asia-Pacific Chief Executive Kurt Roeloffs said he was undeterred by a rush of capital into the region, saying that only specific deals, rather than whole markets, were overpriced.
"When we look at what we intend to do in our private equity series of funds, we hope we will invest at least 30 percent of those funds in Asia generally," Roeloffs said.
"And the three main markets we will do that in are Japan, China and India, and probably in that order." RREEF, the property investment unit of Deutsche Bank, has 54 billion euros ($72.73 billion) in assets under management. It raised a $1.6 billion global fund for property in 2005, but Roeloffs declined to comment on when new funds would be raised and their potential size.
Private equity funds for property are growing bigger than ever, with Morgan Stanley saying last week it had raised $8 billion and Goldman Sachs pooling $4 billion. Morgan Stanley has earmarked around 60 percent of its fund for Asia.
But although Asian markets have climbed fast over the last couple of years, Roeloffs said good deals could still be found. "There are no markets we'd avoid because of the weight of capital, but there are some transactions we'd avoid," Roeloffs said. "You see specific transactions where too many people are pursuing, and it gets priced wrong," he said. "Meanwhile, the transaction next door is reasonably priced.
In Japan, for example, capital values and rents for top-notch Tokyo offices are soaring. Rents climbed 55 percent last year as vacancy rates dropped to 0.7 percent. But analysts believe rents could still rise another 60 to 70 percent to a cyclical peak around 2010. "The office sector is still very interesting in Japan. Rental growth should continue to be strong because the supply wave is muted in this cycle," Roeloffs said.
"We also like retail, we've done some in the past and we'll do some in future." RREEF made its first investment in China last year, with an apartment development in Zhuhai, next to casino enclave Macau. Then earlier this month it launched a Hong Kong-listed real estate investment trust that owns a Beijing office complex and intends to buy more commercial assets.
And on Monday RREEF said it would team up with private equity firm H&Q Asia Pacific to invest $550 million to build at least 25 China hotels. But Roeloffs said a construction boom meant some investors would get burnt. Other major overseas investors in China include ING Real Estate, Singapore developer CapitaLand Ltd and Hong Kong firms such as Cheung Kong (Holdings) Ltd and Hang Lung Properties.