Published July 2, 2007

Japan, S'pore property luring private equity

JAPAN and Singapore's improving returns on property are helping to lure private equity to Asia as capital flows out of Europe and the US, said Charles McKinley from Franklin Templeton Investments.

'Private equity players around the world are actually seeing the Japanese market as being a very fertile ground to have very high' return on investments, said Mr McKinley, Templeton's global real estate portfolio manager. 'They are actually experiencing huge capital flows out of Europe, out of the UK and even out of the US into countries like Japan, Singapore.'

More than 100 real estate funds may raise a record US$69 billion this year as investors seek better returns than stocks and bonds provide, according to Private Equity Intelligence Ltd. Morgan Stanley raised a record US$8 billion for a real estate investment fund last month, after announcing in April it was buying All Nippon Airways Co's 13 Japanese hotels in the country's biggest real estate deal.

Japan's economy is having its longest expansion since World War II, while Singapore expects its economy to grow as much as 7 per cent this year, buoyed by financial services and construction.

Foreign investors are buying Singapore office buildings at a record pace as rents surge after corporate tax cuts lured investment banks including Morgan Stanley and Merrill Lynch & Co.

Overseas private equity groups and funds have spent $2.4 billion to buy office towers this year, 70 per cent of all such transactions in Singapore, exceeding the $1.9 billion of foreign acquisitions for the whole of 2006, according to real estate consultant CB Richard Ellis.

'Frankly, pan-Asia is the most exciting property region in the globe,' Mr McKinley said . 'Asia is the place to be for property in the next few years. - Bloomberg