HSBC AM Buying Singapore’s SilkRoad to Build Real Estate Deal Team

HSBC Asset Management has agreed to acquire Singapore-based real estate private equity firm SilkRoad Property Partners as the UK financial services giant ramps up its property investment platform in Asia.

“HSBC Asset Management has entered into an agreement to acquire SilkRoad Property Partners Group to expand its Asia Pacific real estate investment capabilities under its HSBC Alternatives business, subject to regulatory approvals,” an HSBC spokesperson told Mingtiandi.

The proposed acquisition includes Singapore-based SilkRoad Property Partners Pte Ltd, along with its subsidiaries in Hong Kong, Shanghai and Tokyo, and the five general partner entities associated with its active funds. Terms of the agreement were not disclosed.

The deal would expand HSBC’s real estate fund management capabilities in the region by bringing on board a business with an estimated $2 billion in assets under management, primarily in value-add strategies, as well as a senior team with experience executing deals in the region’s major cities.

Unlocking Value

HSBC’s proposed acquisition comes around eight months after SilkRoad entered its fourth market in the region with the $150 million acquisition of six properties in Greater Tokyo.

The purchase of a central Tokyo office building and five multi-family assets in major commuter cities around the capital, was made under the firm’s $549 million SilkRoad Asia Value Partners II fund.

Known for its “buy-fix-and-sell” expertise, SilkRoad is said to have recently launched a new edition of its SilkRoad Asia Value Partners strategy, with a target capitalisation of $600 million. In 2022, the company moved beyond its value-add tradition with the debut of an open-ended, core-plus fund which reached a $144 million first close in February of last year.

The company said at the time that it aimed to raise $400 million for that strategy by the end of 2023 and to eventually grow the vehicle to $1 billion in size. So far this year there have been no updates provided on that planned fundraising.

Founded in 2012 and owned by the fund’s management team, SilkRoad has invested over $2.3 billion of capital across 57 properties in Singapore, Hong Kong, mainland China, and Japan, according to the company’s website.

In July of this year the company picked up a portfolio of 14 shophouses in central Singapore’s Chinatown area for over S$110 million ($80 million) on behalf of its value-add strategy.

That deal came nearly two years after SilkRoad added a fifth industrial asset to its Hong Kong portfolio with the purchase of a building in the Hang Wai Industrial Centre in the New Territories for an estimated HK$1.3 billion ($167.1 million).

Earlier in 2021 the company acquired a cold-storage building in the Fanling industrial area in Hong Kong’s New Territories for HK$321 million ($41.4 million).

Real Estate Buildout

The proposed acquisition, which was first reported by PERE, comes after HSBC promoted Singapore-based Victoria Sharpe in September 2022 to lead the firm’s real assets investment business, which comprises its direct real estate and listed infrastructure equity teams. That move expanded the responsibilities which Sharpe took on in September 2021 when she was named the company’s head and chief investment officer for Asia Pacific real estate.

Data from MSCI Real Assets indicates no known acquisitions or dispositions by HSBC AM in the period since it began ramping up its real estate team in the third quarter of 2021.

Prior to joining HSBC, Sharpe built and led the Asia Pacific real estate business for Deutsche Bank affiliate DWS, after serving at TH Real Estate (now Nuveen Real Estate) where she ran the London-based firm’s global client capital group for nearly two years beginning from 2014. Earlier, she spent 16 years with global investment management firm Prudential Investment Management (now PGIM) as head of real estate for Asia Pacific.

Sharpe’s promotion followed HSBC’s consolidation of its alternatives business under a single unit in June 2021. HSBC Alternatives, which managed $67 billion of global private equity, hedge fund, venture capital, private debt, and real assets as of September 2023, had not disclosed major direct investments in real estate prior to the SilkRoad acquisition.

The proposed acquisition marks HSBC AM’s second foray into real estate investments, with the company having previously operated a real estate fund management and infrastructure business under its HSBC Specialist Investments unit. That business was spun out through a management buyout in 2011 that saw the unit renamed InfraRed Capital Partners with HSBC retaining a 19.9 percent stake.

Other recent moves by HSBC AM to expand its Asia footprint include its acquisition of Citi’s retail wealth management portfolio in China during October, the buyout of its China mutual fund joint venture partner’s 51 percent stake in HSBC Jintrust Fund Management in May, as well as its purchase of Indian mutual fund manager L&T Investment Management in December 2021.

Industry Consolidation

HSBC’s pick up of SilkRoad comes as the number of acquisitions and minority investments by the top 50 alternative asset managers globally into other private capital firms has accelerated in recent years, with a notable uptick in 2021, according to a May report by consultancy Bain & Company. Increased exposure to real assets and expansion in Asia Pacific were among the major factors driving the consolidation.

In May, US private buyout powerhouse TPG acquired global credit and real estate investment firm Angelo Gordon for $2.7 billion which saw TPG absorbing a $18 billion real estate platform with dedicated value-add strategies spanning the US, Europe, and Asia.

In March 2022, Swedish buyout firm EQT acquired Baring Private Equity Asia for $7.5 billion, giving EQT its first substantial presence in Asia and bringing Hong Kong-based Baring PEA’s $19 billion in assets under management into its expanding portfolio.