Asian institutions have been growing increasingly active in global real estate markets; one of the most high-profile has been China’s Ping An, while Japanese pension funds are seen as the next big source of capital.
That said, property prices are seen as entering bubble territory in some markets, notably Hong Kong and London. Investors have consequently been showing signs of jitters, with even some Chinese insurers being outbid and deals falling through, as reported.
Still, Ping An, which owns assets in most gateway cities, recently invested in Boston and is now looking closely at Sydney, said Lee Hing-Yee, senior executive director of overseas real estate investment at Ping An Trust. But it is hard to compete with local investors in Australia, such as superannuation funds, noted Lee, speaking on a panel at last week’s PERE Global Investor Forum in Hong Kong.
Ping An is also, as a preliminary exercise, looking to invest in early-stage development projects. The biggest mainland life insurer, China Life, is also taking this route.
However, Lee said Chinese investors wanted control of the assets, the project and the funding. They prefer to do a deal on their own – “it’s a major consideration”. The issue with club deals is agreeing on many different things and risking a lack of alignment of interests, he added.
As a result, club deals are not conducive when time is of the essence. Charles Ma, managing director of property developer China Vanke, said: “You have to be able to react quickly. If you’re clubbing it, you are not going to be able to do that.”
Also speaking at the PERE event, Ma said his team could mobilise on a deal within two weeks, noting that the firm aims to be six months ahead of the big mainland investors.
Meanwhile, Japan is emerging as a potential major new source of capital for global real estate. The $1.2 trillion Government Pension Investment Fund (GPIF) is making meaningful progress in expanding its strategic international exposure, and newly privatised Japan Post plans to allocate a portion of its $1.5 trillion portfolio to foreign assets. Other domestic institutions are likely to follow suit.
But Japanese investors are relatively conservative and won’t be going into second-tier cities, said Greg Penn, managing director of capital markets at real estate services firm CBRE. For core investments they will focus on New York, then London, he added, also speaking at the PERE event.
Collin Lau, founder of Hong Kong property investor BEI Capital Partners and formerly head of global real estate at China Investment Corpor“Within the Japanese market GPIF is looking for bond-substitute investments,” he said. “So they are likely to invest in credit and in particular mezzanine credit.”