Source : Financial Times - 23 Nov 2008
Asian property funds are sitting on more than $10bn of unspent capital in expectation of a sharper downturn in the region’s real estate market.
Some, however, are braced for what one senior executive described as “a race against time – we do have a clear timetable to spend this and can only hope the market will bottom out before our deadline, which isn’t obvious at this stage”.
While the US and European property markets started weakening from the summer of 2007, when subprime mortgage lending in America first became an issue, Asian funds continued to raise money aggressively amid optimism that the crisis would not spread to the region.
Last month, Merrill Lynch completed fund-raising for a $2.6bn fund, its first dedicated to Asian real estate.
Morgan Stanley, which has been a big investor in Japanese property, is still in the process of raising several billion dollars for a global real estate fund that is expected to focus on Asia.
Gordon Marsden, senior associate director at DTZ, the real estate adviser, estimates that $10bn of $16bn in Asia-dedicated fund-raising completed in the past two or three years has not been spent.
“When the tables do turn, they will turn very quickly given this amount of money,” Mr Marsden said. “If they [the funds] don’t spend it, they will lose it.”
However, many executives attending last week’s Mipim Asia property conference in Hong Kong predicted that the Asian market was only in the early phase of a slowdown, mirroring broader economic difficulties across a region that has enjoyed a decade-long boom. Hong Kong, Singapore and Japan recently entered recession.
LaSalle Investment Management, which has $10bn of real estate assets under management in the Asia-Pacific region, also has $3bn of available equity capital.
“It’s a very good time to have capital, when market conditions are so tough, and we’re comfortable sitting tight,” said David Edwards, LaSalle’s regional director.
“We’re at the early stage of a correction, and that is not a compelling scenario to invest.”
LaSalle has three years to invest its spare capital, but across the sector, deadlines vary from fund to fund.
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