Oaktree expands in Asian real estate with Pangaea buy

The Los Angeles-based investment giant will buy pan-Asian real estate investor Panagaea Capital as LP interest in Asian real estate surges.

Los Angeles-based Oaktree Capital Management has agreed to buy Singapore-based Pangaea Capital Management, a pan-Asian real estate investment firm.

The deal, which is expected to close by the end of the month, would give Oaktree access to a healthy pipeline of real estate deals in Asia. Financial terms of the deal were not disclosed.

Pangaea, a two-year-old special situations firm, has 25 employees across Singapore, Shanghai, Seoul and Tokyo. Two-thirds of Pangaea’s investments are focused on the real estate sector, specialising in distressed debt, unbundling property from corporate structures, securitisations and direct property holdings and developments. The company invested $1.2 billion in 2007, and an additional $800 million so far this year.

The company’s chairman and founder, Robert Zulkoski, will become Oaktree’s managing director and head of real estate in Asia. Previously, Zulkoski launched the Asian investment business of Colony Capital in 1998 along with current Oaktree real estate head John Brady. In a press release issued by Oaktree, Brady said the acquisition of Pangaea will help Oaktree establish a local presence in Asia, which will result in an improvement in deal sourcing as the firm currently manages its Asian real estate investments from Los Angeles.

Oaktree, which about $50 billion (€36 billion) in assets under management, has made a big push into Asia recently. The firm already had offices in Beijing and Singapore, and in November 2005 it opened one in Hong Kong and appointed Ralph Parks, former CEO of JP Morgan Asia Pacific, as the chairman of an Oaktree Hong Kong subsidiary. Last month, Oaktree closed its first Asia-specific private equity fund, OCM Asia Principal Opportunities, raising $577 million.

According to placement agent sources, interest among limited partners in Asia-focussed real estate funds is strong. This trend applies generally across alternative assets. According to the Emerging Markets Private Equity Association, 2007 is on track to be the biggest year ever for emerging markets private equity funds, with more than $21 billion raised in the first half of the year alone.