Asia has been blessed with a property bull run in the past few years, thanks in part to liquidity from financial markets and government stimulus in Asia and elsewhere, but some investors recommend being fairly selective these days.
“In China, we’re focused on partnering with top-tier residential developers for mid-market projects in selected second-tier cities that demonstrate lower volatility through a strong owner-occupier base and sustainable affordability levels,” says Andrew Heithersay, international director of LaSalle Investment Management in Hong Kong.
Although LaSalle is a long-term bull on Singapore, it has been a net seller over the last 12 months, including two hotel developments – Crowne Plaza Changi Airport and Ibis Bencoolen – which reaped more than S$500 million. The hotels were performing strongly and investor sentiment was buoyant, so it was timely to divest, says Heithersay.
LaSalle’s Asia Opportunity Fund retains ownership of its 20,000-square-metre office building at 20 Anson Road, and the firm expects it to benefit from the continued capital growth evident in the Singapore office sector.
LaSalle IM has been most active in Australia over the past 18 months, closing eight investments with an equity outlay of A$450 million, including two hotels, two offices and four residential developments. Among these deals was LaSalle's 25% stake in the 58,000-square-metre office development at 161 Castlereagh Street in Sydney, which will house ANZ’s Sydney headquarters.
“Institutional capital was substantially sidelined post-GFC, which created a terrific opportunity to co-invest with best-in-class development partners on an attractive cost basis [in Australia],” says Heithersay.
In addition, given LaSalle’s sizeable Australian portfolio of A$1.1 billion, it has strengthened its Sydney-based team with the recent hiring of directors Mike Stratton (acquisitions), Simon Howard (asset management), Matt Bailey (development) and Haydn Stephens (M&A).
Moreover, LaSalle on Friday announced its acquisition of Australian firm Trinity Funds Management for A$9.25 million ($9.9 million) plus the net assets of the business, which it expects to close around August 1.
The purchase of the A$650 million property fund-management business will increase LaSalle’s Australian AUM to around A$1.7 billion and its overall Asia-Pacific AUM to nearly $9 billion.
Trinity's four funds will be rebranded with the LaSalle name, including the A$580 million open-ended diversified core-plus flagship fund ‘Trinity Property Trust’.
Of $45.3 billion in assets globally, LaSalle manages $7.6 billion in Asia, of which 78% is held through its pan-Asian LaSalle Asia Opportunity Fund series and Japan Logistics Fund series, with the remainder in its core investment programme, Asia Property Fund.
As the world emerged from the recent financial crisis, LaSalle divided its approach to opportunistic property investments into ‘risk’ and ‘rescue’ capital. It turned out that, with the exception of a few examples of distress in Japan, there wasn’t much call for rescue capital.
Hence the firm’s slant was towards risk capital: partnering with best-in-class developers to build core real-estate assets that will appeal to institutional investors once completed and stabilised.