Real-estate specialist seeks hedge fund investors

Hong Kong-based Intellectual PropertyÆs business is growing beyond individual clients.
Intellectual Property, a real-estate investment firm based in Hong Kong with $200 million of property assets under management, is looking to extend its clientele from wealthy individuals to hedge funds looking for Asian real-estate exposure.

Tim Murphy, managing director and founder of the firm, says he expects the business to grow to $500 million over the course of next year. ôWe donÆt want traders,ö he says, noting the firm makes money either by charging a flat rate û usually HK$15,000 û per property invested, or by arbitraging the wholesale market via its own equity position.

ôPeople at hedge funds are now talking to developers for new and existing builds,ö Murphy observes. ôWe can find a product that helps a hedge fund or a private-equity fund get a limited exposure, while we can sell other units to our other clients. Some markets like Vietnam require an intensive effort on the ground, and these investors donÆt have a presence there, and canÆt spare the time to visit so often.ö

Murphy came to Asia in the mid-1990s with Prudential Insurance, which was his first employer in his native England. After stints in Hong Kong, Indonesia and Korea, he was named CEO of Dah Sing Bank in Hong Kong in 2004. The job was a poor fit, however, and he left in 2005 wondering what to do. He decided to make a profession of his passion for property, having bought his first one in 1992 in the UK with money he borrowed from his mother. By the time Murphy left the UK in 1998, he had 20 properties under his belt.

Now Intellectual Property owns properties in 10 markets, of which eight are in Asia. ôI wanted a crack at being aggressive. With scale we can buy 20-30 properties at a time rather than two or three,ö he says. ôOur clients understand the macro picture in these countries very well but they donÆt know how to access real estate. Typical property funds and Reits are overvalued, and you canÆt gear or leverage your investments.ö

The current portfolio involves around 40 clients, many of whom invest in several markets. Gearing and risk varies by the deal. ôIn Vietnam you canÆt gear at all, but in other markets you can gear more,ö Murphy says.

He claims the worst property deal heÆs done for a client had a 22% return on capital over 12 months, with other deals doubling or tripling in value. What MurphyÆs team will not do is take currency views for clients. ôWe donÆt do carry trade mortgages,ö he says. ôThat is up to the client.ö

But his team will provide advice about when to sell a property and suggest exit strategies: ôWe donÆt buy whole buildings because of liquidity. Our average client is an expatriate who will want to sell at some point.ö

Intellectual Property sponsored last weekÆs ôDing Dong in Hong Kongö, aka Hong Kong Fight Nite, a white-collar boxing match featuring traders, hedge-fund managers and investment bankers. Murphy says he was very pleased with the response and hopes to sponsor it again next year. He is also in talks with the event programmers about adding a second match. ôMaybe property guys against lawyers,ö he says.
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