Property provides rich pickings for Asia's elite

A new global breed of private investors has emerged as competitors to institutional investors for prime real estate priced at US$500 million and above.

The trend is being felt in Australia, where ultra-high net worth individuals (defined as those with a personal wealth of over $30 million) or family groups are successfully outbidding institutional investors for property.

Despite a price tag of more than $100 million, an office building in Elizabeth Street in Sydney's central business district attracted bids from ultra-high net worth Asians.

Alistair Meadows, Jones Lang LaSalle's head of international capital group Asia Pacific in Singapore, says it is no longer uncommon to see a large asset (upwards of $100 million) bought by individuals or family groups.

He says this segment of the market used to be the domain of institutional buyers, such as listed companies, managed trusts or private equity groups.

Private Chinese investment company Bright Ruby Resources, controlled by the Du family from Shandong, has bought two Sydney buildings for a total of $264 million in the past 12 months after reportedly eyeing a $500-million office block in George Street.

In September, Bright Ruby broke all records for a piece of commercial real estate in Singapore, paying $S1.2 billion ($A1.04 billion) for the Grand Park Orchard Hotel, which included a retail podium. Singapore sources believe that other Chinese UHNWs joined the Du family in the deal.

Another example of the buying power of UHNW Asians includes the sale of a 40 per cent stake in the GM Building in New York to Zhang Xin, founder of SOHO China, the largest commercial real estate firm in China.

Or the purchase of the Aviva head office in London by two billionaires – Singaporean Kuok Khoon Hong and Indonesian Martua Sitorus – for £288 million pounds ($A518 million) in June.

Those who deal with UHNW investors say that real estate is a key component of their private portfolios.

Real estate ranks ahead of travelling and golf as the top passion of billionaires, according to the inaugural Wealth X-UBS Billionaire Census, published last month.

After London and New York, it seems that Australian real estate is very much in the sights of some of the world's ultra-high net worth individuals. 

Top commercial agents like John Talbot, managing director, of Jones Lang LaSalle's Investment and Advisory Group, are increasingly seeing individual investors with spending power of up to $100 million on a single acquisition.

In one deal, an Asian UHNW bought a shopping centre for almost $60 million in Sydney's north-west.

Two UHNW individuals from Hong Kong are in the final stages of securing two office blocks for $40 million and $45 million in two separate deals in central Sydney. At the time of writing, these two transactions were expected to close in the next few days.

Dominic Ong, director of Asian Markets with Knight Frank in Sydney, is sourcing office towers and shopping centres, hotels and development sites for some 20 prospective investors, who are prepared to spend $20 million to $100 million. Ong expects them to look at other investment opportunities in Australia.

Talbot says that UHNWs typically invest through their family enterprises and look for buildings with potential for redevelopment. Property development offers high profit margins.

This fits with the observation of Daniel Harel, UBS head of Global Family Office for South East Asia, who says the 'new money' from Asia looks for high returns, comparable to returns of at least 10 to 15 per cent from their operating businesses in Asia.

New money, says Harel, is different from 'old money' from Europe, which looks for long-term cash flows.

He adds that savvy UHNWs look for emerging trends, investing in agribusiness as well as healthcare and related sectors that cater to the world's ageing demographics.

So far, the number of transactions in Australia has been far and few between. The industry counts just half a dozen large commercial real estate transactions involving UHNW investors.

But big-ticket deals are less uncommon in the residential sector.

Agents say UHNW buyers – mostly from Asia, but with a sprinkling from the United Kingdom, Europe and New Zealand – are selectively picking off some of Australia's finest residential real estate.

The top price paid for an Australian mansion is $53 million by a mainland Chinese for the waterfront mansion Altona in Sydney's posh Point Piper.

In Melbourne, a mansion was sold in Toorak for more than $20 million – a record for that city.

Craig Pontey, director of Ray White Double Bay, says these UHNW investors run international businesses and they own three or four homes around the world.

They have started to include Sydney on their list.

Pontey says they look for trophy homes priced up to $25 million. "We have a number of people looking at properties and hopefully we will be able to close a couple of deals in the next three to four weeks."

Justin Brown, chairman of CBRE Residential, says there are currently "six to eight buyers floating around with $10 million to $20 million, looking for homes in Sydney".

An recent expatriate bought a Sydney apartment with expansive views of the iconic Bondi beach for more than $21 million and a Chinese bought a $17 million penthouse in Sydney.

A leading eastern suburbs agent, who sold a mansion to a mainland Chinese for $33 million, says: "I am currently talking to prospective buyers on a property priced above $20 million.”