Investors eye Asia Pacific amid euro zone uncertainty

AMID the uncertainty surrounding the euro zone, funds raised from property sales are being redirected to the stable Asia Pacific region.

By InvestSMART · 14 Feb 2012

By InvestSMART ·
14 Feb 2012

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AMID the uncertainty surrounding the euro zone, funds raised from property sales are being redirected to the stable Asia Pacific region.

Superannuation and company pension funds are the dominant buyers of property in Australia as they re-allocate funds out of cash into bricks and mortar to generate higher returns.

Investa Office Fund is the latest to raise cash through the sale of its 49 per cent stake in its last remaining US office tower at 900 Third Avenue, New York, for $US172.7 million ($161 million).

It was completed at an 8.7 per cent premium to book value and marks the exit from the US for the fund. It will now focus 100 per cent on the Australian office sector.

The group has raised $US180 million from the sale of four US assets owned by the ING Office Fund to which Investa bought the management rights a year ago.

Investa's newly-appointed fund manager, Toby Phelps, also expects to settle the sale of its NVH Building in Paris later this month.

Peter Zuk, Goldman Sachs' property analyst, said that as at June 2011, Investa's net equity interest in the New York asset was about $US27 million. Investa has indicated it expected net proceeds of $US19 million after adjusting for debt, taxes and transaction costs.

Mr Zuk said that with the NVH Building on track for settlement this month, Investa's remaining European exposure is Bastion Tower, Brussels and its equity holding in the Dutch Office Fund.

Lend Lease is reported to be one of four developers short-listed to redevelop the BBC headquarters in west London.

Lend Lease, which built the athlete's village for the London Olympics, is competing against Stanhope, a developer backed by Japan's Mitsui Fudosan, Sir Stuart Lipton's Chelsfield Partners and Resolution Property, the Times newspaper said.

A new survey reveals that Australia is the more favoured region for property investors.

CBRE's latest Asia Pacific ViewPoint shows respondents believe market sentiment deteriorated through the fourth quarter of 2011 as investors grew increasingly worried over the unresolved euro zone debt crisis and the uncertain global economic crisis. However investment volumes rose, primarily due to a number of larger sale deals.

Australia remains the standout market in the region as offshore groups continue to buy property and as domestic super funds re-emerge as active buyers.

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Frequently Asked Questions about this Article…

Why are investors moving to Asia Pacific property amid euro zone uncertainty?

The article says funds raised from property sales are being redirected to the more stable Asia Pacific region because investors are worried about the unresolved euro zone debt crisis. That shift reflects a search for stability and better returns as market sentiment in Europe weakened.

What role are superannuation and company pension funds playing in the Australian property market?

According to the article, superannuation and company pension funds are the dominant buyers of property in Australia. They are reallocating money out of cash and into bricks-and-mortar assets to generate higher returns, helping drive demand in the Australian office and broader property market.

What did Investa Office Fund sell and what does that mean for investors?

Investa Office Fund sold its 49% stake in its last US office tower at 900 Third Avenue, New York, for US$172.7 million (A$161 million). The sale closed at an 8.7% premium to book value and marks Investa’s exit from the US market; the fund will now focus 100% on the Australian office sector, which is important for investors tracking geographic exposure and portfolio strategy.

How much cash has Investa raised from recent overseas asset sales and what net proceeds did it expect?

The group raised about US$180 million from the sale of four US assets tied to the ING Office Fund and US$172.7 million from the 900 Third Avenue stake. The article notes Investa reported a net equity interest of roughly US$27 million in the New York asset as at June 2011 and expected net proceeds of about US$19 million after accounting for debt, taxes and transaction costs.

What remaining European exposure does Investa have after these sales?

The article reports that with the NVH Building in Paris expected to settle soon, Investa’s remaining European exposure is mainly Bastion Tower in Brussels and its equity holding in the Dutch Office Fund.

Which developers are shortlisted to redevelop the BBC headquarters in west London and why does that matter to investors?

Lend Lease is reported as one of four developers shortlisted to redevelop the BBC headquarters, competing with Stanhope (backed by Japan’s Mitsui Fudosan), Chelsfield Partners and Resolution Property. Large redevelopment projects like this attract major developers and capital, and they can signal opportunities in commercial property and construction sectors where institutional investors may be active.

What did CBRE’s Asia Pacific ViewPoint survey find about market sentiment and investment volumes?

CBRE’s survey showed respondents believed market sentiment deteriorated through the fourth quarter of 2011 due to worries about the euro zone debt crisis and global economic uncertainty. Despite that, investment volumes rose, primarily because of several larger sale deals. This suggests cautious sentiment can coexist with significant transactional activity.

Is Australia still considered the most favoured market in the Asia Pacific region?

Yes. The article states that Australia remains the standout market in the region, with offshore groups continuing to buy property and domestic super funds re-emerging as active buyers, making it a favoured destination for property investors according to the survey mentioned.