By Rachael Boon
The Sunday Times
Sunday, November 17, 2013
Significant real estate assets abroad are proving a major attraction for Singapore companies looking to broaden their investment base.
Just last week, it was reported that Singapore sovereign wealth fund GIC is part of a group that is in the final stage of talks to buy a stake in New York City’s famous Time Warner Centre.
Earlier this month, developer Oxley Holdings purchased the Royal Wharf development site in the Docklands area, in East London. The huge site along the River Thames will see homes and commercial, retail, leisure and educational facilities spring up in the next few years.
Another developer, Overseas Union Enterprise (OUE), acquired the US Bank Tower in Los Angeles, the tallest building in California, earlier this year.
Economists say that it may be the right time to make overseas investments in the United States and Europe, as their economies begin to recover.
Singapore is small and firms cannot invest only here, said CIMB economist Song Seng Wun, and opportunities across the globe are aplenty.
GIC, for example, holds prominent assets with good long-term value, such as the Seoul Finance Centre in South Korea and the Westin Paris. It also owns an office complex in Tokyo, called the Shiodome City Centre, near Ginza. One property familiar to many Singaporeans is the Queen Victoria Building in Sydney but they may be unaware that GIC is the owner.
“Large sovereign funds will have deep pockets, such as the Norwegians’, and will certainly have to redeploy their capital and maximise their returns,” said Mr Song.
“From an investment standpoint, property has been one of the areas where they have been competing with one another.
“These opportunities present themselves when economies are just coming out of or entering recession… the United States is still the world’s largest economy, even though it has a dysfunctional government, and the private sector is very productive.”
Real estate already plays an important part in GIC’s total portfolio.
GIC said investments in the private markets offer higher returns to compensate for the higher risk involved, as these assets are less liquid and more difficult to trade.
It added that real estate assets also serve as a hedge against inflation.
Pontiac Land Group chief executive Michael Su agreed, adding: “If opportunities present themselves in China and Europe, we will not rule out these markets.”
The luxury developer is a key stakeholder of the massive 72-storey residential tower that will come up next to the famous Museum of Modern Art (Moma) in midtown Manhattan.
Mr Craig Ward, senior director of regional capital marketing at property research and consultancy firm Savills Singapore, said: “We have seen a recent surge in demand from Singaporean firms for overseas investment… While we would expect to see GIC investing in large-scale, often trophy, assets in key global cities, more recently, we are seeing a pick-up in requirements from Singaporean-based development groups and high net-worth family offices.”
One property giant, CapitaLand, is well-established abroad.
Its serviced residences business unit, The Ascott, owns and operates 221 properties overseas, while its shopping malls business, CapitaMalls Asia, owns and manages 84 overseas shopping malls.
These include mixed developments such as Raffles City Shanghai, in which CapitaLand has a 27.8 per cent effective stake.
Diversity is key for firms when it comes to investing.
M&L Hospitality executive chairman Michael Kum said: “We have built an international portfolio designed to attain global growth while guarding against downturn in any specific market. Diversity is key to our portfolio and we invest in high-occupancy hotels in international gateway cities.”
M&L owns Four Points by Sheraton Sydney, a hotel which sits on the waterfront at Darling Harbour. A third tower and 230 rooms will be added to the development, with an investment of more than A$160 million (S$186.8 million), said the firm last month.
CIMB’s Mr Song believes more acquisitions are on the horizon, as the US is seeing an “upturn of property cycle”.
“The best time to go in is when you’re at the beginning of the new growth cycle,” said the economist, who added that “iconic addresses and properties are sought after as they can maintain value”.
Source: The Business Times © Singapore Press Holdings Limited. Reproduced with permission