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By Jason Simpkins
Just a few months ago, the world's biggest property fund manager, ING Real Estate (ING), announced plans to spend another $700 million on Chinese real estate. That was on top of the $350 million raised for residential development in China in 2006.
Now, investment firms and sovereign wealth funds around the world are scrambling to catch up.
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"On the one hand you see part of the world slowing down, triggered by the credit crunch," ING Real Estate Chairman and Chief Executive, told Reuters. "And then you see another part of the world -China, Japan, and even Australia -where there are lots of opportunities."
India has been one of the primary beneficiaries of foreign real estate investment so far. With tight lending practices and a thriving market, a rapid influx of foreign cash -much of it retreating from the U.S. market -has begun to pour in.
Lehman Brothers Holdings Inc. (LEH), for instance, has already deployed about $2 billion in India and is reportedly preparing to raise its first India fund this year.
"It will be for real estate, and a companion to our Global Real Estate Fund," Tarun Jotwani, chairman and chief executive of Lehman Brothers India, told the Mint paper.
The fund "will be large enough to give us significant firepower in a sector that is experiencing a capital crunch but is small enough and flexible enough to allow us to build a top quality portfolio," Jotwani added.
Most recently, Philippines-based Ayala Corporation and its affiliate, Arch Capital Management, announced plans to invest $100 million in the Indian property market over the next two years.
India isn't the only country enjoying fresh inflows for foreign cash either. In fact, Vietnam currently attracts more overseas investment than India does.
For Vietnam, 2007 was a banner year for foreign direct investment (FDI), which brought a record $20.3 billion into the country.
In 2005, FDI was recorded at $ 5.8 billion, and in 2006 it reached $10.2 billion, before virtually doubling in 2007. Over the last 20 years Vietnam has amassed $98 billion in FDI for over 9,500 projects, and a great deal of that money has been finding its way into the real estate market, Arabian Business reported.
Last week, Qatar Investment Authority bought a 27% stake in Dragon Capital, a Vietnamese property fund, which will buy into offices and serviced apartments in Ho Chi Min City, Bloomberg News reported.
In February that same Qatar Investment Authority bought a 15% stake in an Indian office complex being built at the Bandra Kurla complex in Mumbai.
The fund has $60 billion to play with and one of its managers said earlier this week that more emerging market real estate investment is in the works.
"We are focusing on prime cities in India, China, Singapore, Korea, Vietnam and Malaysia, cities around the world where there is strong GDP growth and fundamental unmet demand for high quality real estate," Navid Chamdia, head of real estate at Qatar Investment, told Bloomberg at a wealth funds conference in Abu Dhabi. "About 40% of our real-estate investments will be in Asia."
In addition to taking a harder look at Asia the fund may start looking for some bargains in the U.S. market.
"We anticipate several opportunities in the U.S. for mezzanine financing, and individual distressed assets," Chamdia said. "We are looking at a number of these opportunities with several partners."
Sovereign wealth funds like these will be fixtures in real estate for years to come. Fueled by a commodities boom and large currency reserves Morgan Stanley estimates sovereign fund assets could reach a total of $12 trillion by 2015.
News and Related Story Links:
- Arabian Business:
Record US$ 20.3 billion FDI drives Vietnam real estate