Investment ViewPoint - Asia Pacific

A recent report by CBRE Richard Ellis shows that the Asia-Pacific property market remains busy despite cautious investors and an uncertain global economy.

What deals got the CBRE executives talking?

Hong Kong

The big story was in Hong Kong, where Mapletree Investments acquired Festival Walk for HK$18.8 billion (US$2.4 billion), making it the largest commercial real estate deal in the city’s history. William Liu, CBRE Director of Property Investments, reported that Mapletree plans to use the mall as a seed asset for a Hong Kong-focused commercial property fund. According to Liu, the deal reflects foreign investors’ sustained appetite for property assets in Hong Kong.

Japan

In Japan, J-REITs completed a series of major deals, and a number of foreign core funds returned to the market for the first time since the March earthquake. Associate director of investment properties Tom Moffat wrote that J-REITS were most visible in terms of completed transactions, for example with Daiwa Office REIT’s acquisition of the E-Space Tower office building in Shibuyaku, Tokyo for JPY 24.0 billion (US$290 million.)

Other deals completed include Orix REIT’s purchase of a 23% stake in Shibaura Island Air Tower, an apartment building in Minatoku, Tokyo, for JPY6 billion (US$72.0 million.)

South Korea

Headlines were also made in South Korea when Samsung Group acquired three office buildings from RREEF for a combined total of approximately KRW 400 billion (US$369.7 million). The properties include Prime Tower, acquired by RREEF from GIC last year, and the HSBC headquarters, of which about 35% remains owned by HSBC on a strata-titled basis.

New Zealand

New Zealand was host to the largest commercial property deal so far this year. Investment property director Warren Hutt reported the sale of two major hotels in the tourist hotspot Rotorua on the North Island. The sale of Novotel Lakeside (US$43 million) and Ibis (US$15 million), brokered by CBRE Richard Ellis, proved that interest in hospitality remains strong in New Zealand.

China

There are still challenges facing the market. Although stock market volatility witnessed in early August and the worsening economic situation in the United States and European Union did not have a noticeable effect on investor sentiment in key markets during the period, buyers may naturally turn more cautious in the months ahead.

Caleb Shen, Executive Director of Investment Properties in China, wrote that a new regulatory change by the China Banking Regulatory Commission (CBRC) will tighten developers’ access to trust firm credit, further evidence of the state’s determination to cool the property sector.

This could spell trouble, since trust firms have become vital lenders to the property sector as financing from traditional banks continues to dry up. The new rule reportedly requires trust firms to provide the CBRC with lending details for any property project before any contracts are signed, meaning the CBRC can effectively reject any transactions it chooses.

Malaysia

Still, bright futures are forecast for areas like Malaysia, where executive chairman Christopher Boyd reported positive investor sentiment and active M-REITS. Boyd wrote that interest in retail assets remained firm, and that oil and gas markets have kept the market robust in recent months.

REITs also remained busy in Malaysia, with Axis-REIT announcing plans to acquire RM260 million (US$86 million) worth of new assets including six logistics properties in Penang, Johor and Selangor to expand its investment portfolio.

Read the full July 2011 report!

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