Wednesday, June 07, 2006

HK Property Investing, The OZ Way
Macquarie's Dominance

Property investor Macquarie Global Property Advisors, a unit of Australia's Macquarie Bank, will spend as much as US$4 billion (HK$31.2 billion) on investment properties in Asia in the next 12 months. About US$1 billion of the total will be targeted at Hong Kong. The fund is called the MGP Asia Fund II. The fund has invested US$1 billion in Asian properties in the past 12 months.
Portfolio strategy is long-term investment in Grade A offices, large retail malls, luxury residential property and industrial properties, with targeted rental yields of 20 percent. MGPA is particularly bullish on the outlook for Grade A offices in HK and expects rents to jump 50 percent this year.

Overseas funds have been active in snapping up HK investment properties over the last 6 months, more than doubled the amount over same period a year ago. MGPA last month bought the Low Block of Grand Millennium Plaza in Central for HK$2.38 billion. In March, it purchased Vicwood Plaza, a 38-story commercial and retail complex in Central, for HK$2.6 billion from Morgan Stanley Real Estate Fund, which had bought the building in May 2003 for HK$842.8 million. MGPA's first foray into Hong Kong was in August 2001 when it bought 56 Repulse Bay, a luxury residential development in Island South, from Sino Land. Last week, the fund said the development was sold out, with 52 out of 53 houses snapped up by wealthy buyers. It had spent "hundreds of millions of dollars" renovating the houses for resale. With revenues of over HK$3 billion, profit from the project was "in excess of HK$500 million.

Many have theorise on Macquarie's ability in almost every facet of investing. I remember when I was working in Sydney back in the late 80s and Macquarie was just a small potato, really small potato. It had been lumbering around for sometime as a bit player. It was definitely not first tier, not even second tier investment banking outfit. It took the top few managers to change the culture. They basically created things/products out of ideas alone, constantly challenging the way things have been done. A stickler for professionalism and ROI. Performers were rewarded and a fee based culture was built as they did not have the backing of a really big capital base. They now manage everything from tolls to airports to REITs with the same mantra and culture, as long as you can control and manage 90% of the risks, everything else is documentation.

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