Property investment funds look East
Major property investment funds are looking to the Far East and Asia as the best bets in the current global economic downturn.
Morgan Stanley is raising $10 billion for a global property fund and plans to put $1.5 billion or more of that into China, shrugging off concern about a property market downturn.
The Morgan Stanley Real Estate Fund VII Global, the latest in a series of property investment funds, is expected to begin investing worldwide before the end of this year.
It aims to invest at least $1.46 billion in China over the next few years, taking a gradual approach while focusing on the largest cities such as Shanghai, where the price for a luxury downtown apartment can exceed $20 million.
The retail portion of the fund-raising has been completed with a minimum requirement of $1 million for individual investors in Asia. The institutional portion, which requires at least $10 million for each institutional investor, will be completed soon.
Some industry analysts have warned that bubbles may be emerging in the property markets of some major cities such as Shanghai, where many buyers are foreigners and investors rather than long-term residents.
A property investment arm of Morgan Stanley is reported to have plans to sell at least two high-end serviced apartment projects in Shanghai.
But Morgan Stanley and other foreign funds, including Blackstone and Carlyle CYL.UL are also looking for new investment opportunities in high-end residential and commercial properties in China.
Some foreign funds have also begun shifting their focus to second-tier Chinese cities, reflecting the large number of investors and intensifying competition in the largest cities.
Chase & Co said it expects Japan's beleaguered property market to rebound and will use staff gained from its acquisition of Bear Stearns to develop its real estate financing business.
'There is a lot of interest in buying real estate right now both from domestic real estate investors and foreign investors,' said Gregory Guyett, chief executive of JPMorgan Securities Japan.
'And those investors will look for financing. That's a business we think can be very attractive.'
JPMorgan gained some 80 employees in Tokyo when it took over troubled Bear Stearns in May, which has led it to expand its small real estate securitisation team to about 25 people.