LaSalle ready to invest in Asian real estate

SINGAPORE: LaSalle Investment Management said yesterday it has US$3bil available for investing in Asian real estate and is ready to re-enter the market after nine months on the sidelines, focusing initially on Japan and Australia.

“The process of debt restructuring and market resetting and capital and economic stabilisation seems to be happening fastest in those countries,” chief investment officer for Asia Pacific Ian Mackie told the Reuters Global Real Estate Summit.

“Japan has had a price correction that has been very significant (and) people forget that Japan is still the second biggest economy in the world,” he added.

The US real estate investment firm, which has US$8.7bil in Asian assets, favours “gateway” cities such as Tokyo and Osaka in Japan and Sydney, Melbourne and Brisbane in Australia.

MacKie said LaSalle’s US$3bil war chest, most of it from a fund raised around the middle of last year, would probably translate into acquisitions worth US$6bil as the firm planned to keep debt levels low.

The firm, the investment arm of property services firm Jones Lang LaSalle, used to borrow up to 75% to fund an acquisition in Japan but will likely seek about 50% financing under current market conditions.

Asian property investment sales fell sharply in the second half of last year, hurt by a tightening of credit markets and a collapse in investor confidence following the collapse of Lehman Brothers in September.

For the first three months of 2009, investment sales fell 83% to US$3.1bil from a year ago, according to data compiled by rival property services firm CB Richard Ellis. The worst-hit markets were Japan, Hong Kong and Singapore.

Mackie said LaSalle invested in most types of property but was keenest on warehouses, hotels and offices. Besides Japan and Australia, its other preferred destinations include China and South Korea.

But the firm will probably give Indian real estate a miss as it feels the potential returns do not compensate for the risks.

“We have not seen an attractive investment in India in terms of risk-adjusted returns ... We can get the same returns in Japan and the risks are much, much higher in India,” he said.

LaSalle said that while it saw opportunities in Japan and Australia, it remained cautious about Asian real estate in the near-term and warned that a pick-up in home sales in China, Hong Kong and Singapore could be a “bear rally”.

Kenneth Tsang, the firm’s Asia-Pacific head of research and strategy, said the spike in apartment sales was driven by pent-up demand and low mortgage rates and may not be sustainable.

By Reuters