MGPA and BlackRock, the world's biggest asset management, is eyeing major countries like as Japan and Australia for the first time as they move into Asian real estate, according to its new acquisition target senior executive. adhunter
According to Jim Quille, Chief Executive Officer of MGPA, BlackRock is wagering that rising interest rates and quick expansion in the area would produce robust housing demand for next years.
"In their perspective, property, in particular Asian real estate, would probably gain from capital flows in the next years," said Quille. "We are now investing in Japan, China and Australia because we feel they have the highest value."
"Clearly, Hong Kong is very costly and toppy at the moment and it's not a market in which we'd be interested."
BlackRock looks keen to benefit from further capital gains in Asian office property in the future. On May 21 the company announced the acquisition of MGPA, a value-added private equity real estate investor. This raised BlackRock's immobilized assets to $25 billion and exposed them to Asian immovable for the first time. The acquisition is expected in the third quarter to be finalized.
"We have $12 billion in assets and we compete in nearly all industries they don't." Mr. Quille stated. "We are present worldwide immediately and the two firms are quite complimentary."
The neighborhood is not overly attractive, though.
"Obviously Hong Kong is quite costly and toppy right now, and it's not a market we'd be concerned about," Quille added. "We have visited Hong Kong four or five times during the previous 15 years. We come in when the cycle is favorable "According to CBRE, Hong Kong's Financial District, Central, the most expensive office property market has been classified for 3 years in a row, at an average annual occupancy of $235.23 per square foot. In the top five, the only non-Asian market is London's West End, second after Beijing's Financing Street and Jianguomen, as well as New Delhi's Connaught Place neighborhood. The West Kowloon of Hong Kong and the Maranouchi/Otemachi districts of Tokyo are also top 10.
In the footsteps of its previous parent, the Blackstone Group, BlackRock concentrates on Asian real estate. At the end of June, Blackstone shut down its first Asia-focused $1.5 billion private equity fund, making it the second biggest Asian fund raising in history, behind only the $1.65 billion Japan fund raised at the end of the year by Fortress Investment Group.
Macquarie Global Property Advisors has 13 offices in Asia and Europe, formerly known as MGPA. As regards immobilization, it has no association with BlackRock, which has just 14 billion dollars in immobilized assets, entirely in the US or in the United Kingdom, out of 110 billion dollars of alternative assets.
MGPA says that it has a competitive edge since it owns its own properties, rather than just investing in them, like Canadian real estate manager Brookfield Asset Management.
MGPA, for instance, was Project Manager and Construction Manager for Asia Square Marina Bay Development in Singapore.
"We will take the entire purchase from the property to the design and put out construction tenders and maintain assets and finally dispose of them," said Quille. "This is a set of talents not possessed by many people in the banking business."
Developers like Hong Kong Land and CapitaLand take projects from design to completion, but seldom establish funds or receive investments from outside parties. Quille believes that with cash flowing into Asian property, BlackRock and MGPA will have an edge over fund managers that just invest in property, and use external managers rather than dirty their hands with direct building management.
"The allocators must suffer when big amounts of capital enter the market," Mr. Quille added. "The partner has to concentrate on the lowest money source, so the deals that you believed were gone."
In addition to Tokyo and Australia's main cities, MGPA works on acquisitions in Shanghai, where rates are competitive and some purchasers are also looking to sell assets to pay debt. Mr Quille feels that the renovation and repositioning of older structures is possible in China.
Tokyo provides profitable investment possibilities in Grade B and Grade C buildings built before the earthquake-proofing requirements are revised following the disaster. Updating standards and refurbishing the interior of the office will assist the owners increase rents.
"We think that the value-added area that encompasses Japan and China offers excellent potential, if you're seeking for Alpha in your portfolio," Mr. Quille said.
According to Quille, Tokyo is now one of the world's finest investments, as borrowing rates are virtually nothing and office space returns are quite high. MGPA also found buildings for sale at a fraction of their replacement costs efficiently.
Quille remarked, "We have many possibilities to reorient them." "Where we can increase operational efficiency and decrease expenses, rental growth inefficiencies are not necessary."
Credit is in limited supply in China, which, according to Quille, has brought more profitable transactions to the market. The MGPA focuses on buildings constructed within the previous eight years that need to be rehabilitated and repositioned. According to Quille, retail and office properties are more enticing than residential and commercial property in China.