Property investors going back to basics

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Published May 20, 2009

Property investors going back to basics

There's more stress now on asset management

By UMA SHANKARI


THE property investment landscape has changed significantly because of the global financial crisis, speakers at a panel discussion said yesterday.

For a start, investors are going 'back to basics', said Blake Olafson, director and head of the Asia real estate group at international investment bank Arcapita.

For example, pension funds that used to invest in riskier asset classes are now beginning to redirect their investments into less risky assets, he said.

Agreeing that the industry is going back to basics, John Evans, managing director of Tractus Asia, said: 'Looking at it from a global economic perspective, the Asian real estate market had become a market where everyone was trying to get in, everyone was becoming a property developer.'

Mr Olafson and Mr Evans were speaking at Cityscape Asia, an annual real estate exhibition and conference aimed at investors.

The 'back-to-basics' approach includes a focus on making existing assets work harder.

'There's a lot more emphasis around true asset management, a shift towards hiring third-party facilities managers, and much more effort is going into tenant retention strategies,' Mr Olafson said. 'Before the downturn the focus was on building development, now asset management has become a lot more important.'

Players in the industry are going back to their core competencies and this, combined with tighter credit conditions, is driving a 'flight to quality' and a focus on assets that generate cashflows from day one, he said. 'There is liquidity, but it is being driven towards good quality projects.'

Panellists agreed that liquidity is beginning to return to the Asian market, although banks are still very selective about which projects to back.

Speakers were also quizzed about when they expect real estate markets to emerge from the current slump. In response, the panellists said there was no way to put a timeline to recovery.

'Everyone is trying to tell where the bottom is,' said panellist Stuart Labrooy, chief executive of Malaysia's Axis Reit Management. 'I think the full effects of the recession have not reached Asia yet.'

Property valuations should start to bottom out in Asia in the second half of 2009, he said.

More than 3,000 real estate developers, investors and regulators are expected to attend Cityscape Asia, which focuses on all aspects of real estate development, on May 19, 20 and 21.

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May 20, 2009 Wednesday

Property sector outlook 'uncertain'

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The view from an apartment in Hong Kong's Peak district. Singapore, Hong Kong and Tokyo are attractive over the medium to long term as they have 'quite large commercial markets' and sustainable economies, says Invista Real Estate chief executive Duncan Owen. -- PHOTO: BLOOMBERG

DESPITE the recent uptick in property interest in some countries, the outlook for the sector remains uncertain, an Asian real estate conference heard yesterday.

Speaking at Cityscape Asia 2009, Mr Stuart Labrooy, chief executive of Malaysia-based Axis Reit Management, said the full effects of the credit crisis 'have not yet reached Asia'.

Property valuations in Asia, he said, will probably bottom out in the second half of the year, but there was no telling when the recovery will come.

Also speaking during a panel discussion on the impact of the downturn on Asian real estate, Mr Blake Olafson, Arcapita's head of Asia real estate group, said the industry was now focusing on the basics.

He added: 'If you're a pension fund manager, that's what you'll do - not suddenly try to become a real estate developer in some Tier 3 city in China. There's a greater sense of realism in the market, and a return to looking at fundamental cash flows, not just internal rate of return deals.'

Invista Real Estate chief executive Duncan Owen said Singapore, Hong Kong and Tokyo are attractive over the medium to long term as they have 'quite large commercial markets', sustainable economies and increasing market transparency.

The fact that the Singapore market is now badly affected like other markets is an opportunity for them, he added.

Invista, Britain's largest-listed property fund manager, recently bought the Asian real estate business of Babcock & Brown, which gave it offices in Singapore and Hong Kong.

In his keynote address, Singapore's Urban Redevelopment Authority group director (strategic planning) Richard Hoo acknowledged that the economic climate was now more challenging than during last year's Cityscape Asia.

Today's focus, he said, was on 'enhancing our readiness' when the economy improves.

Yesterday's Cityscape Asia exhibition was quieter than previous events. Just 40 exhibitors have set up booths this year, and the organiser is expecting more than 3,000 people to visit over its three-day period ending tomorrow.

Last year, it attracted 5,520 real estate professionals and 70 exhibitors.

The 2007 event - inaugurated by National Development Minister Mah Bow Tan - drew 4,689 participants and 125 exhibitors.