Prudential eyes Brazil, China funds

The real estate investment arm of the insurance giant is launching an industrial development vehicle focused on Brazil and retail development fund targeting China. The funds could be limited to a small number of large LPs.

Prudential Real Estate Investors is launching two funds targeting development deals in China and Brazil as it structures the vehicles around a smaller number of larger LPs.

The Parsippany, New Jersey-based firm will target retail developments in China and industrial logistic properties in Brazil, according to people familiar with the matter. PREI declined to comment further.

However, a Reuters report cited PREI chief executive Allen Smith as saying the vehicles would be anchored by a large global investor with a limited number of other investors “who shared the same level of investment sophistication and financial capability”.

PREI chief executive
Allen Smith

In the wake of the credit crisis, PREI has been approached by larger institutional investors to adopt a smaller LP base in its funds in a bid to reduce LP counterparty risk, people familiar with the matter told PERE.

The China fund has no set launch date, but the Brazil vehicle, which has an investment period of about three years, could close in the second half of 2011, Smith was cited as saying.

“It's a development oriented fund … it's focused on what would be both the industrial and export corridor between Sao Paulo and Rio (de Janeiro),” Smith told Reuters. “What we've really tried to do is take the platform we've built very successfully in Mexico, which is focused on sector-specific funds … and in effect export that to Brazil so that we're using some of the same people.”

Smith added that development was a critical component in emerging market real estate investment owing to the “lack of institutional stock you can acquire”.

When it came to China, the chief executive said: “If you can pick one thing and do it really well, you can over 20 years have a very substantial business.”