|
A
more current picture of the United States is portrayed in
We have been staying in California over
the summer and anticipated the storm as demonstrated by the
commentary below done a year ago.
While Asia is
experiencing much growth in property markets and institutional investors
from the West start to focus their efforts on investing in China and India,
for those with a trained eye in real estate funds management, there are
still opportunities in the America's.
Since HSBC announced recently huge
mortgage defaults in the US, there has been increasing concern about the
fundamentals of the American property market.
However upon closer examination, the
rising mortgage defaults that panicked markets this week have been
concentrated in areas of the country already reeling from layoffs in the
automobile industry and in hurricane-stricken states on the Gulf Coast.
Yet the repayment of mortgages is holding up well on the Atlantic and
Pacific coasts and in other parts of the country, including those that saw
huge run-ups in property values in recent years. Not only that, but
there is scant evidence -- so far -- that the mortgage problems are causing
wider economic damage.
The fundamentals for investing in the West is still good and given that
Private Banking is 'busting' in Asia with significant wealth creation in
Hong Kong, Singapore, China and India, sophisticated investors from Asia
will continue to invest a small percentage of their wealth in the West because of the
stable socio-economic framework in America's. Land tenure in
both United States and Canada is
freehold!
GLOBAL GATEWAYS
There are certain cities in the America's which are global gateways for
investing in real estate. It is natural that now that we have
had several generations of Asians educated in the West, that siblings from
this background will return to terrain that is familiar to them during their
years of prep school or university, now that they are involved in Family
businesses.
Look to cities where the fast-growing Asian and Middle-East wealth were
educated: San Francisco, Boston, and New York for example
in the United States and Vancouver and Toronto in Canada. One
only has to know core cultural values to understand that Education is
fundamental to Asian culture and wealth preservation.
THINK LOCAL, ACT GLOBAL
Identify first the fundamentals in each of these markets.
In Canada, for example, most of the trophy assets in each of the
metropolitan areas of the country are owned by Institutional investors
because until recently, federal government laws allowed pension funds to
invest only in Canada. So being a relatively small market
although large in gross area, institutions own the best office buildings and
shopping centres in the country, with few opportunities for private equity
to enter the market place. As a result, the yields are modest
for these asset class because of the constant competition to invest in real
estate.
United States institutional investors are similarly focussed in their own
country in urban centres with now a handful just recently exploring
opportunities in Asia.
However in recent years the pool of wealth seeking similar high quality
assets has now been augmented by additional pools of cash from Real Estate
Investment Trusts (REIT's) in both Canada and the United States.
So it becomes even harder for private equity to find real estate 'jewels'.
BLUE-CHIP
For over two decades now, I have maintained a 'blue chip' approach
towards real estate investing and focus on the best locations in any one
city. For example, have bought waterfront in
Asia (Shek-O) and Beach
Avenue in Vancouver and Queen's
Quay in Toronto because it's not like God is creating more waterfront in
these markets. All such investments for us have
proved profitable with significant capital appreciation because they are a
limited commodity and there is consistent and growing demand.
RESIDENTIAL
Given that there are few opportunities to invest in the commercial and
investment market in the above mentioned cities, many have turned to
purchasing premium condominiums such as Coal Harbour in Vancouver which now
has seen values appreciate from $500 per sq ft when they were originally
marketed to now over $2,300 sq ft.
Although it is a well known fact that such investments do not provide
much of a return (because Landlords are responsible for Taxes, Insurance and
Maintenance in North America) offshore investors have been especially
far-sighted at purchasing multiple units because (1) Real estate is just
another commodity for trading; and (2) Their children can use the units
while they are attending school in the West.
In fact, its the lack of foresight on the part of the local investors -
they could not believe that values would ever reach such benchmarks of
values - that contributes to the fact that local homeowners have missed the
market and can no longer afford to upgrade. This is where
the experienced global investor has a significant edge, with proper guidance
and understanding in local markets.
Similarly we know a Singaporean investor who started quite small with
purchase of a few 'top drawer' condominium in New York City by Central Park and
now just a few years later owns several floors of penthouses in this rising
market because he keeps expanding his investments from profits as locals come to him for his
premium real estate investments that were bought with prudent eye for value
and right timing. New York has experienced a resurgence in the
residential market due to the large bonuses of the hedge fund managers and
partners at Wall St. investment banks.
At the end of the day, investing in premium developers who have the
reputation of being in #1, #2 or #3 position in their local market will
ensure long-term capital appreciation as one should assume that subsequent
purchasers will be locals and they will pay a premium for well constructed
product by the city's top developers. Just as product of
SHKP in Hong Kong or Wing Tai or City Developments or Capital Land in Singapore are top-grade in those
markets, one should seek out the best in the local markets in the Americas.
AGING DEMOGRAPHICS
The aging demographics of the 'Baby Boomers'
(meaning those born as product of post WW II) who are now approaching
50 and near retirement age means that North American residents are valuing
more resort and recreational properties.
As a result the real estate market in the Pacific
North West and the west coast of British Columbia are experiencing a surge in
values as well as development opportunity for this growing
audience. And the jet-set citizens-of-the-world have
purchased private island retreats which are freehold in Canada and the United
States, because there is nominal political risk and relatively cheap value although
opportunities for accessible waterfront lands are not easy to find.
On an international level, Barbados and
'tax-friendly' places like the Bahamas are also experiencing a surge in
interest with increasing global wealth.
Again, these are limited commodities with a
growing investor base so this is a formula for profitable investing.
CONCLUSIONS
In summary, there is more cash than ever
in global markets but also in North America whose net worth have increased
as a result of investing in the stock market and housing in the last
decade. In Canada, one's principal residence is the only
allowable Tax-free capital gain while in the United States, mortgage
interest is deductible for principal residence so it is important to
understand the fundamentals of each local market.
Given that there is some 'unsettled'
sentiment with the mortgage situation in the US referred to above, there is
a natural tendency for some to pull back on investing but the sophisticated
private equity clients who have been blocked out of the market in recent years
because of the buoyant liquidity and hot real estate markets in the Americas
are quietly getting ready to come back into the market with the less
competition perhaps, or to be able to cherry-pick to invest in real estate
with strong fundamentals and good value to be had. I do
not expect premium real estate in the above-mentioned markets to collapse
but certainly the opportunity for strong capital appreciation in coming
years will continue and this is a great time to be sleuthing for 'jewels of
opportunity'.
This website ( www.realestatefundmanager.com
) is a global property portal envisaged to be a primer | Real Estate 101 for a few markets in the world. I have been a global
strategist and investor in Asia, the America's and in Europe so have been
archiving much factual information on each of these markets for decades for my own benefit and for a few close friends.
Because I am frequently asked the fundamentals in
many of these markets, this project is a work-in-progress so that my clients
can be up-to-speed on the local fundamentals of each market and will recognize 'value' when I identify it. In each of the cities
identified, I work with a team of top investment professionals whose associations with me have been equally long
standing and together we have made significant investments for ourselves and
our high net worth clients. We are
particularly gifted at our ability to think 'outside the
box' which has enabled us to be ahead of the curve in practically all markets we
cover, for
now over two decades. Deals never come in a 'Betty Crocker' box
so one has to be able to recognize opportunity and know how to act
accordingly. Our intuition is backed by facts and fundamentals so our
approach to investment is to mitigate risk and act opportunitistically.
I am still in the progress of updating
much of this so please do not judge us now and besides, this will be on hold
for a few weeks as I prepare to leave for Beijing at the end of the week to
get an update on that property market
first-hand. This will be an awesome data base when I am through
but that could be a while because no other corporate investor or real estate
professional in the world has had the
foresight yet to merge real estate and tech, and this I learned from my
experience as global fund manager a decade ago for Hong Kong based
billionaire, Richard Li and my hands-on experience as commercial broker for
many of Asia's largest institutional investors in the 80's when investment
bankers in the west were not yet paying attention to the needs of these
sophisticated clients. This opportunity gave me the experience to learn strong fundamentals
and to
churn hundreds of million at a time profitably and consistently.
I take this opportunity to thank the
handful of global billionaires and their team of professionals who I have worked with
over the past 25 years
who educated me to their point of view so I have become a real estate investment professional knowing local markets in detail on three
continents. The diversity of dealing with institutional clients
as well as Asian and Ismali billionaire families from around the world has
enabled me a unique perspective as well as detailed skills. In the past, an investment
bank in London tried to hire me to create real estate derivatives for such high net worth individuals which is
testament to my capabilities and foresight. I am also
facetious to thank Henry Cornell at Goldman Sachs for not being around
yet when I entered the industry as the first female real estate investment
professional and became vice president at Colliers, a firm that was
dominated only by men since 1898 until the time that I joined the firm. Without
these people, I could not have the success of being the global dealmaker that I am
today. - 2007
|
