GSB news—2007 Real Estate Conference - International Real Estate

International real estate market is faring better than its U.S. counterpart, according to a panel of GSB alumni who discussed emerging markets at the First Annual GSB Real Estate Conference sponsored by the Real Estate Alumni Group November 5 at Gleacher Center.
“This is a very positive aspect of the real estate landscape,” said panel moderator Michael Herzberg, ’80, cochairman and co-CEO of FPL Advisory Group.
C. Allan Swaringen, ’98, managing director of LaSalle Investment Management, said that international real estate has seen “unprecedented growth” in 2006 and 2007 and has been building to this point for 40 years. “We do think there will be a fall-off in 2008, but not significantly,” he said.
The international real estate growth is a result of such factors and trends as the advent of the Euro, growth in Asia, the securitization of debt and equity, and the shift from owner-occupied real estate to investor-owned real estate, Swaringen said.
Trends have been increasing to the point where “there really has never been so much institutional capital trying to invest in real estate,” Swaringen said, mainly because of opportunities for diversification and yield.
For Swaringen’s company, the composition of real estate investment is changing, with a greater percentage of real estate outside of the United States. He said eight years ago, about 70 percent of the firm’s real estate assets under management were in the United States and 30 percent were outside, with none of that in Asia. He anticipates that three years from now, percentages will comprise a third each in the Americas, Europe, and Asia.
Similarly, John Kessler, ’90, managing director and global chief operating officer of Morgan Stanley Real Estate Investing, said that his firm’s “opportunistic” real estate investments used to be primarily of U.S. origin. “Today it’s quite the opposite,” he said, with at least 70 percent of those types of funds outside the United States.
Kessler said he can see that number growing to 80 percent within the next three years.
However, about 85 to 90 percent of the company’s core real estate funds are United States-based, he said.
Lehman Brothers is “very bullish” on real estate investments in India, said Rodolpho Amboss, ’97, managing director and CFO, Lehman Brothers Private Equity Real Estate Group.
But the firm also invests in smaller markets.
Latin America makes up a “very tiny space in the investment universe,” Amboss said. Despite a slow legal system, a deficiency of market data, and a lack of financing structure, Latin America has a “very good and stable source of local operators” with which to partner when making real estate investments there, Amboss said. His company focuses on Mexico and Brazil, which together cover roughly half of Latin America’s area, population, and GDP.
Amboss said about a year ago his firm teamed with other international investors to create a big-box retail company to invest in retrofit and income-producing assets in Brazil.
“It’s really very interesting to see the birth of a new industry,” he said.
Also investing in Latin American real estate is a “tremendous influx” from the Middle East and Europe, he said.
Likewise, investors are tapping the real estate market even in small countries like the Phillipines.
“There is a very lively relationship between this small company ($4.5 billion market cap) out in the middle of nowhere, in the Pacific Ocean, and what’s happening in the rest of the world,” said Vincent Tan, ’73, executive vice president of Ayala Land, Inc., which is the Phillipines’ largest and only full-line property developer.
Foreign-owned shares of Ayala are a significant portion of Ayala Land equity, he said, and much of that is from the United States. “It’s not something that people are normally aware of, that maybe your pension funds are somehow invested in the company I work for.”
The company has come out with its first Asian property fund, about $294 million for projects in Thailand and China, Tan said.
China is of major interest to U.S. real estate investors.
“We’re certainly big believers in China,” Kessler said, noting that his company has about 60 employees in Shanghai and is investing in office and retail development opportunities.
The country is attractive because of its GDP growth, the size of its economy and urbanization, and rising income levels. But because of the difficulty of directly investing there, the company generally invests with local partners, he said.
Kessler’s company started internationally investing in real estate in 1997, primarily driven by U.S. institutional investors. It started investing in Europe and later extended to Asia. The firm’s most recent fund for investing in international real estate, at $8 billion, is four times as big as the fund for investing in U.S. real estate, he said.

GSB news—2007 Real Estate Conference - International Real Estate 2008-07-27T04:04:00-07:00 Rating: 4.5 Diposkan Oleh: Merlyn Rosell