The Asia Pacific hotel industry has bounced back robustly since the global financial crisis began — by almost any measure, 2010’s performance outshone that of 2009, and 2011 is positioned to do even better, as the region’s economy continues to soar and demand increases across emerging markets.
From the Current Issue
The Indian property market differs significantly from many other markets in the world, and investment strategy and decisions must be adjusted accordingly. The Indian market is extremely large, diverse, complex, fragmented and experiencing rapid growth. It also is rather undeveloped, with issues of corruption, low transparency, and bureaucratic laws and governance. However, the Indian market offers a variety of potential opportunities.
The use of debt is widespread in real estate investment, and there is good reason for this. Real estate assets are big-ticket, lumpy and capital intensive, and hence many investors require debt financing to get in the game, especially if they want to be able to acquire enough properties to gain meaningful diversification benefits. However, investors also are drawn to debt at times not because they need it but because they believe that it changes the nature of the return-risk structure of their equity investments in their favor. In this case, investors use fixed-cost mortgage debt financing in the hopes of levering up or magnifying the returns to equity invested above those generated by the property (asset) based on total capital invested; debt is used to juice returns. The major debt overhang the sector is dealing with today is a stark reminder that investors — and lenders — can take this too far with disastrous ramifications.
Most of the macroeconomic trends playing out in the ongoing story of Asia’s development point to ever-greater industrialization and growth of domestic markets and thus support an investment hypothesis focusing on industrial, warehousing and logistics (IWL) properties in the region. These facilities may be urban, suburban or rural, but do not include office parks, R&D parks, high-tech parks or cyber parks, which share more features with regular commercial property than with industrial assets.
Hamburg-based Union Investment Real Estate GmbH has sold the Whitefriars office building in London to a special purpose vehicle of the Employee Provident Fund of Malaysia for £148 million.