Property Grunt

Tuesday, July 01, 2008

Roll Call: Ethnic Backlash

“My friend is like, why don’t you write something inappropriate on the form like, ‘I hate ch**ks’ … I just filled out the form and I wrote ‘I love ch**ks'— and who doesn’t?”

Sarah Silverman

Nina over Reuters emailed me some primo articles on the Reuters Real Estate Summit.

Below are some of my selections.

Asia, Mideast to unleash "go west" property drive

SINGAPORE/SEOUL (Reuters) - A wave of capital from the Middle East and Asia could be on its way into ailing U.S. and European property markets, as a weak dollar and falling asset prices lure sovereign wealth funds and institutional investors.

Since Japanese investors bought a string of U.S. offices in the 1980s only to be burnt by a market crash, global property investment flows have been mostly one way -- from the West to Asia .

But that looks likely to change.

"Instead of talking about emerging markets in Asia, now emerging markets could be in the U.S. ," said Yu Lai Boon, chief investment officer of Dubai World, a state-owned investment firm.

"As investors in the Middle East, we're seriously looking at the U.S. and European markets right now as the beginning of investment for the next golden era."

The New York Post reported on June 11 that the Abu Dhabi Investment Council was negotiating to buy a 75 percent stake in New York City's landmark Chrysler building for $800 million.

Last year, North American investors pumped about $8.4 billion directly into Asian property, while the reverse flow reached only $2.7 billion, according to Jones Lang LaSalle.

They handed over another $30 billion, treble the Asian contributions, to global property funds, which invested $25 billion in Asia and $29 billion in North America .

At a Reuters Global Real Estate Summit this week, several executives said capital flows could become more balanced, with Chinese, South Korean and Japanese investors looking abroad.

With the U.S. dollar falling about 3 percent against the yen so far this year, and around 13 percent over the last 12 months, their spending power has been magnified.

The full text of the story is on at:

Chinese investors renew interest in U.S. properties

NEW YORK (Reuters) - Chinese interest in U.S. commercial property is back and this time Chinese investors may become significant players as the nation devises a vehicle to divert large amounts of funds for foreign investment, a Cushman & Wakefield executive told Reuters on Monday.

Flush with dollars from a huge trade imbalance, Chinese sovereign wealth funds are beginning to test the waters in New York real estate. They were recently among the throng of bidders for three properties once owned by Equity Office Realty Trust, said Scott Latham, executive vice president, Capital Markets group for real estate services company Cushman & Wakefield.

"They are coming. We've seen them in the bidding process over the past four months on a number of assets we've handled," Latham said at the Reuters Global Real Estate Summit in New York . "I think that unlike the Middle Eastern sovereign wealth funds, they have not yet figured out an efficient way to get the money out of their country."

Mexico may benefit from higher fuel prices: AMB Property Corp CEO

NEW YORK (Reuters) - Soaring fuel prices may force some companies to move manufacturing and warehousing closer to the United States, a trend likely to benefit Mexico and U.S. urban centers, the head of AMB Property Corp Properties told Reuters on Tuesday.

Skyrocketing fuel costs are forcing manufacturers to rethink their locations. With oil topping more than $135 a gallon, manufacturers are weighing the costs of labor against the price of shipping, AMB Property Chairman and Chief Executive Hamid Moghadam told the Reuters Real Estate Summit.

"I think Mexico stands to benefit the most," he told Reuters.

Higher fuel costs may affect not only where goods are manufactured but how they are transported and warehoused. Although the upshot is not likely to be a complete overhaul, incremental changes are likely as the cost of fuel trumps labor and rent expenses, he said.

"It's not going to be any total change of the supply chain," he said at the Reuters Summit.

Still, while high U.S. labor costs and a lack of manufacturing infrastructure will likely hinder a U.S. rebound in manufacturing prowess, Mexico may benefit as manufacturers seek to cut shipping costs.

"They have the combination of cheap labor and close proximity to the U.S. market as opposed to China , which has the cheap labor but obviously is farther away," Moghadam told Reuters.

Mexico already manufactures items from drugs and food to flat panel television screens and auto parts, he said.

ING Real Estate plans China and Japan funds

SINGAPORE (Reuters) - ING Real Estate is raising a $750 million fund for China and plans to launch a fund for Japan later this year, expecting troubled landlords and developers in both countries to offload bargain properties.

Richard Price, the firm's Asia head, told Reuters some of the best investment opportunities in Asia would be in Japan , where rising borrowing rates and a cut in bank lending for property could persuade some landlords to sell.

ING Real Estate, a unit of Dutch financial group ING ING.AX, is looking to raise $300-500 million in the second half of this year to buy offices, industrial buildings and shopping centers in Japan , he told Reuters.

"Japan is the largest market in the region and there'll be very real opportunities over the coming year or 18 months," Richard Price, Asia chief executive for ING Real Estate, said at the Reuters Global Real Estate Summit in Singapore.

"It's a very highly leveraged market and probably the most severely affected by the credit crunch in this region."

Most transactions in Tokyo in the next year will probably be for buildings that are not quite top-notch, Price said at the Reuters Summit.

Tokyo's office market is probably peaking, according to most analysts, having been popular with investors, who have typically borrowed heavily at Japan 's rock-bottom interest rates to take advantage of a price recovery in the last five years.

The global crunch has made Japanese banks more conservative in their lending for property deals, threatening to soften prices of small and second-grade buildings.

Property stocks are bargains, LIM says

SINGAPORE (Reuters) - Asian property stocks are ultra cheap but investors could be losing out because they prefer private equity property funds to property securities funds, Hong Kong fund manager LIM Advisors told Reuters on Tuesday.

Japanese real estate investment trusts (REITs) are trading at more than 40 percent discount to net asset values, while shares of Thai and Philippines property developers are all bargains, according to Peter Churchouse, director for LIM Advisors.

"Private equity guys are having an easier time raising capital today than securities guys," Churchouse said at the Reuters Global Real Estate Summit in Singapore .

"In a way you should be looking at it the other way around, because these private equity guys are going to pay full dollar, full price, to buy real estate and you can buy real estate stocks at half the price of the assets.

"Logically, you should be buying Japanese REITs, not Japanese property."

Mori Hills REIT 3234.T, for instance, is trading at 35 percent discount to NAV, Churchouse told Reuters.

Amid lingering concern about the global credit crunch and its impact on the real estate sector, many property stocks in Asia and other parts of the world have headed south. Japan 's property sector has fallen 10 percent so far this year, Singapore 's 14 percent and Hong Kong 's 25 percent.

This is just a fraction of the news that has been presented at the Conference, I would recommend going to the Reuters to read more of the articles.

You are all probably asking "What's with the racist Jello commercial?" Well you should thank the Angry Asian Man for that.

Also I think people should know that Sarah Silverman got her career off the ground not by being funny but saying an ethnic slur and passing it off as comedy.

There is a ton of money being funneled around different parts of the world for these real estate transactions. Wherever that money lands, you can damn well be sure that its origins are going to quite different from its destination. Don't think it will not go unnoticed. It didn't for the Japanese as the late Mr. Buckley pointed out in his own polite manner with this article.

Understand that certain factions of society are going to feel under siege by these factors. And there will be various individuals who will seek to exploit this tension to their advantage. So expect more media spots like that Jello commercial and expect Sarah Silverman's humor, for the lack of a better word, be more popular.

However, things are a little different these days. These "foreign investors" are not simple going lay down to be kicked and punched. They will stand their ground through legal and media channels. If they have the money to invest then they have the money to protect themselves.

America is not going to be only place where you will see an indigenous outcry against foreign investors. I recently watched a PBS called Wide Angle about the emerging Chinese legal system called The People's Court.

It shows how the Chinese government has been pushing the development of their legal system to all corners of their country and progress has been made. However when it comes to real estate legal issues, even Manhattan's most infamous slumlords have nothing on what some of the Chinese most corrupt real estate developers who have been getting away with murder. Literally. Already tensions are high in China between the haves and have nots. Throw some foreign investor money into the mix and the s**t will really hit the fan.

This is not a doomsday scenario, this is our new reality. Just be aware of that.