Home Investment

According to the top executive of its new acquisition target, MGPA, BlackRock, the world's largest asset manager, is targeting key markets such as Japan and Australia as it moves into Asian real estate for the first time. Sale in Qatar | Property Hunter Qatar | Apartments
According to MGPA executive chairman Jim Quille, BlackRock is betting that higher interest rates and the region's rapid growth will generate strong demand for property in the coming years.
"In their opinion, real estate, especially Asian real estate, is likely to benefit from capital flows in the coming years," Quille said. "At the moment, we're investing in Japan, China, and Australia because we believe they offer the best value."
"Hong Kong is obviously very expensive and very toppy at the moment, and it's not a market we'd be interested in."
BlackRock seems to be eager to take advantage of additional future capital gains in Asian office space. The business announced on May 21 that it would acquire MGPA, a value-added private equity real estate investor. This increased BlackRock's real estate assets to $25 billion and gave it its first exposure to Asian real estate. The transaction is expected to be completed in the third quarter.
Mr. Quille explained, "We have $12 billion in assets and we compete in almost every industry they don't." "We have an immediate global presence, and the two companies are extremely complementary."
However, the area is not overwhelmingly appealing.
"Hong Kong is obviously very expensive and very toppy right now, and it's not a market we'd be interested in," Quille said. "In the last 15 years, we've visited Hong Kong four or five times. When the cycle is favorable, we come in."
According to the property brokerage CBRE, Hong Kong's financial district, Central, has been ranked the most expensive market for office property for three years in a row, with average occupancy costs of $235.23 per square foot per year. The only non-Asian market in the top five is London's West End, which is ranked second behind Beijing's Finance Street and Jianguomen business district, as well as New Delhi's Connaught Place district. Hong Kong's West Kowloon and Tokyo's Maranouchi/Otemachi districts are both in the top ten.
BlackRock is following in the footsteps of its former parent, the Blackstone Group, by focusing on Asian real estate. In mid-June, Blackstone closed its first Asia-focused private equity property fund for $1.5 billion, making it the second-largest Asian fund raising in history, behind only Fortress Investment Group's $1.65 billion Japan fund raised at the end of last year.
Macquarie Global Property Advisors, previously known as MGPA, has 13 offices in Asia and Europe. In terms of real estate, it has no correlation with BlackRock, which had just $14 billion in real estate assets, all of which were located in the United States or the United Kingdom, out of a total of $110 billion in alternative assets.
MGPA claims it has a competitive advantage because, like Canadian real estate behemoth Brookfield Asset Management, it owns its own assets rather than merely investing in them.
MGPA was the project manager and construction manager for the Asia Square development on Marina Bay in Singapore, for example.
"From purchasing the property to handling the design to sending out construction tenders, we'll take it all the way to completely rented, asset manage it, and eventually dispose of it," Mr. Quille said. "That's a range of skills that not many people in the finance industry possess."
Developers like Hongkong Land and CapitaLand take projects from conception to completion, but they rarely launch funds or accept third-party investment. Quille believes that as capital begins to flood into Asian real estate, BlackRock and MGPA will have an advantage over fund managers who merely invest in properties and employ external managers rather than getting their hands dirty with direct management of the buildings.
"When a large amount of capital enters the market, the allocators have to suffer," Mr. Quille said. "The partner needs to focus on the cheapest source of money, so the deals you thought you had vanish."
MGPA is working on deals in Shanghai, in addition to Tokyo and Australia's major cities, where yields are competitive and some buyers are also trying to sell holdings to pay down debt. Mr. Quille believes that there are opportunities to renovate and reposition older office buildings in China.
Following the earthquake, Tokyo offers lucrative investment opportunities in Grade B and even Grade C buildings constructed before earthquake-proofing standards were updated. Updating standards and renovating office interiors will help owners raise rents.
"If you're looking for alpha in your portfolio, we believe the value-added space, which includes Japan and China, offers great opportunities," Mr. Quille said.
Tokyo currently provides one of the best investment opportunities in the world, according to Quille, since borrowing costs are nearly zero and office space yields are relatively high. MGPA has also been effective in locating buildings for sale at a fraction of their replacement cost.
Quille said, "We're finding a lot of opportunities where we can reposition them." "Where we can boost operational efficiency and lower costs, we don't need rental growth inefficiencies."
Credit is in short supply in China, which has caused more lucrative deals to come to market, according to Quille. The MGPA is concentrating on buildings built in the last eight years that need rehabilitation and repositioning. Retail and office real estate, rather than residential and commercial, are more appealing to the business in China, according to Quille.