Patrizia launches $1bn mid-market APAC infra fund

The new fund, launched by Patrizia in partnership with Mitsui, held a first close on $110m in December 2022.

Patrizia Infrastructure is targeting between $500 million and $1 billion for its new flagship APAC-focused sustainable infrastructure fund, a vehicle it has launched in partnership with Mitsui.

The target for the APAC Sustainable Infrastructure Fund would make it Patrizia’s largest-ever strategy in the APAC region. The firm held a first close of $110 million in December 2022 and is targeting a final close in 12-18 months’ time, following a further interim close within the next five months.

The vehicle is a 10-year closed-end fund with an option for two one-year extensions. The fund is targeting a 10-12 percent net IRR, but Saji Anantakrishnan, Patrizia’s head of infrastructure, Australia and Asia, said the firm is seeing returns “well north of that”.

On the fund’s size, he said: “It’s not a hard cap but we think it is the right size for a mid-market offering. With $1 billion you can do a decent ticket size of around $80 million to $100 million within the fund, which gets you 100 percent or at least a controlling equity stake in a mid-market asset where we can add a lot of value based on our experience and track record.”

Core sectors

The fund will target investments in four core sectors with sustainability as an overarching theme: energy (50 percent of the fund’s assets), digital infrastructure (20 percent), social infrastructure (20 percent) and mobility (10 percent). It aims to invest 70 percent of its capital in the developed APAC markets of Australia, Japan, Singapore, South Korea, New Zealand and Taiwan, with the remaining 30 percent in developing Asian markets.

“We think around 50 percent of the dealflow will come in the energy space because the energy transition conversation is so pivotal to all economies in the Asia-Pacific,” Anantakrishnan said. “APAC is still predominantly an export region, so the cost of energy in the production value chain remains critical – if the marginal cost of energy rises in a country like Taiwan, for example, it can lead to low-margin businesses like semiconductor producers losing their competitive advantage.”

The pandemic had led to an increased recognition as to the criticality of digital infrastructure, accelerating a trend that was underway prior to 2020, he noted. “It’s become one of the most important parts of what a government provides to its citizens to be attracted to a city or a country.”

Osamu Sugawara, general manager of asset management business department, financial business division, at Mitsui & Co, said the firm had enjoyed a “complementary” partnership with Patrizia going back to 2008.

“We want to explore the opportunity to invest in assets with positive sustainability outcomes,” Sugawara said. “A-SIF has our four key focus areas that we will deploy capital across, and Mitsui has invested in all these sectors before, so we will of course leverage our experience to find the right opportunities.”

Anantakrishnan said Patrizia has always thought “long and hard” about stakeholder engagement and social licence to operate in all its investments, and will apply that filter across all four sectors the new fund will focus on.

“We don’t want to put in infrastructure which a community considers unacceptable in 10 years’ time, say. Getting that sustainability piece right is critical to everything we are doing,” Anantakrishnan said.

The Patrizia Infrastructure team first partnered with Mitsui in 2008, when its team operated under the name of Challenger Limited, to launch the Emerging Markets Infrastructure Fund. That vehicle focused on deals in parts of Asia, South America and Africa. The team subsequently operated under the Whitehelm Capital banner following a merger, before Patrizia subsequently acquired the Whitehelm business in September 2021.