Live from Cityscape USA

[Shekhar Shah]

Just heard from Simon Ziff
1) Deals not getting done and not getting to finish line
2) Real disconnect amongst all parties
3) So many things going wrong in cre market
4) Return to "art of doing our business" art of selecting best real estate deals
5) Smaller deals are much better
6) Need to go to many more capital sources

[CREOpoint]

Any word on foreign ownership of properties??

[Jim Searing]

Wednesday 10 Sept 2008 1130 EDT Key points from India Uncovered: Digging Deeper To Be Part of its $90 B Real Estate Market at Cityscape USA

"To do business in India, you need to be glocal, creative, understand local situations, commit and be patient. At the end of the day, the fundamentals are very strong.". Kumar Gera. Chairman + Managing Director. Gera Developments and Chairman, CREDAI

1. Infrastructure goes with development. Expect that you will need to fund and build it. To leverage this investment, build near ports and roads.

2. In many cities, the only way to get started is to rehabilitate existing properties.

3. Tier 2 cities offer more in terms of infrastructure investment, certainly more than Mumbai due to its political paralysis

4. Spreadsheet analysis should anticipate 14 percent cap rates rather than overly optimistic 8-9 percent many have used for tier 2 cities

5 Computerized land records and title insurance are coming to India to enable clearer titling6. "In the land of opportunity, the only thing that will work is an act of creation itself." Aashish Kaira, Co-Founder & Managing Director, Trikona Capital, which is following the strategy of taking responsibility to build the infrastructure around and to their projects.

6. Commentators expressed the view that the RE market is correcting after a three year run-up. Investors need to plot out what it will all look like 15 years from now, and will see that the opportunity is staggering.

7. Working in Tier 2 cities requires rolling up your shirt sleeves rather than showing up with Hugo Boss suits!

8. India, with a population of 1.2 billion, is adding the equivalent of the population of Australia (20 million) each year.

Overall message: Vision, Intelligent Boldness, Capital, Cultural Smarts, Patience and Commitment to Build Complementary Infrastructure are Essential to a Winning Strategy in India. Make No Small Plans.

[Jim Searing]

10 September 2008 Cityscape USA: The Middle East Playing Field: Still Highly Volatile, Too Late to Invest in Real Estate's Best Kept Secret? Summary.

1. Middle East (ME) looking for US investors and RE developers to apply talent and technology.

2. Edward Burton, President and Managing Director US-Saudi Arabian Business Council (USSABC):
-Some think SA trying to catch up to Dubai--"They are wrong."
-Many Americans overlook SA, but the growth there is quite impressive.
-"The Kingdom is the economic muscle of the ME", while it strikes its own image within the Gulf.
-Estimated need for 4.5 million housing units within the next five years, and they are "not meeting their objectives in residential or commercial side" yet.
-Cited $347 billion projection in RE investment opportunities in 2012, and $1.4 Trillion out to 2020.
-Strides being made in legal reform, transparency, financial support to RE sector.
-Growth is affected by inflation, which moved from 1-2% to 9-11% last year, now seems to be moderating.
-70% of population under 30 years old

3. Steven J. Atkinson, CEO Arabian Real Estate Investment Trust (AREIT)
-Set up first REIT in ME
-US UK European funds looking at market entry
-Risk adjusted return is better here than elsewhere in the world
-Dubai a leader in transportation improvements
-"We're not anywhere near the top of the market for commercial real estate and it is not a bubble."
-Saudi Arabia in need of logistics parks for distribution centers

4. Abu Chowdhury, Partner & COO, Emerging Markets Partnership, Middle East
-The growth and success of Dubai demonstrates to people what is achievable.
-Oman is on the most picturesque part of the Gulf; becoming a tourist center for the future, with deep ports, beautiful ocean, great hotels.
-The ME market has just begun. People can have a great experience there. US investors and developers have not been as aggressive as they could be, and they risk missing a big opportunity here.

5.Walter Kleinschmit, Founder and President, R2E Consultants Inc.
-Transformation over past 20 years, from sand, to high rises.
-Opportunity is still there, it is not too late. Certainly it is volatile and still an entrepreneurial environment.
-Invite you to invest, but please do not change the character of the place, "we are having fun."
-Much in the way of retail potential, catering to tourists in SA. Many people stay for up to three months, in part to shop.
-"The Middle East is more American than America." When you shop there, there are more American and European brands represented there than elsewhere to meet the demand.
-SA wants and needs foreign investment; the government promotes FDI.
-SA=23th easiest place to do business according to objective studies
-"Stop watching CNN and Fox and go there yourselves to see."
-Also consider emerging markets in Jordan and Syria.
-Jordan: Changing quickly, advancing wealth; big tourism play ahead--Petra, one of the most fascinating places in the world, had 800,000 visitors last year, could be 3x that; market quickly absorbing western values. Has $, skills and aspirations to grow.
-Syria: A poorer nation, but privatization has started. Challenging, and feels like Dubai or Doha 15 years ago. Incredible tourism opportunity, with destinations that are 8,000 years old.
-Overall, within the ME, there is a long history of capitalism, with people have been buying, making and trading long before America was discovered.
-Close connection between retailing, franchising and RE development
-Consider JV's, offset investment opportunities among your options.

Summary: Opportunity remains for investors willing to accept volatility; many ME countries open to investment and partnership; fundamental change is on-going and pace is quickening; governments very supportive of foreign direct investment.

[Jim Searing]

10 September 2008 Cityscape USA China: Practitioners In the Land of the Awakened Sleeping Dragon--Satisfying the Never Ending Demand

Moderator: Leslie P Norton, Asia Editor and Feature Writer, Barron's Magazine
-"It used to be that real estate was a way to fast wealth in China..."
-Now, there is inflation, a decline in property value, cooling off of land deals, a shortage of capital, credit squeeze, and it appears that government is trying to slow down foreign investment in RE.
-What lies ahead?

Tay Eng Kiat, CEO Ascendas China
-China moving from planned economy to more free market/open. Government still has control.
-RE development started in the 1980s in southern China around Shenzhen; in the 1990s to Shanghai; and over the next two decads, more focus on the north and Beijing areas, with government also encouraging a 'go west' movement to central China
-China moving toward high technology and R&D. Chinese companies making overseas acquistions.
-Huge intellectual development of population: 6-7 million people sit to take exams to enter universities.
-Demand growing for upscale housing
-Opportunities for industrial, business parks, hotels, office, retail
-Challenges are tighter regulations and restrictions, lack of guidance on REIT operation, intense competitition from international and local players, rising costs, choosing right location in Tier 2 and soon Tier 3 cities, cultural gaps
-"I live in Beijing and I was stunned by the Opening Ceremonies Show"
-The next huge event will be the 2010 Shanghai Expo--it is called the "Economic Olympics"
-Government is assessing its program to cool off an overheated RE sector. While 'this policy has worked', policy makers are starting to discuss unwinding the policy.

William G. Tung, Managing Director Asia Pacific, Rockefeller Group Development Corporation
-"They created an artificial credit crunch that coincided with a global credit crunch" to cool down the RE sector
-Regulatory controls did not seek to kill an overheated market, but to slow it down and allow it to be monitored carefully. If deemed effective, then controls would be loosened.

Hendrik H.C. Gienow, Managing Director Asia Pacific, Eurohypo AG
-Government at a crossroads, wanted both international investment and maintaining tight controls. Will need to decide which way to go
-Gap between how much money foreign entities have allocated to invest in China, easily $100 Billion earmarked; when one looks at actual investment, there's a gap, due to government 'interference and the regulatory framework' which limits foreign inflows.

Scott Li, President and CFO, Shibo Real Estate Inc.
-Early indications that government trying to undo limits on foreign investment and may change reporting rules over the next year to make credit more available.


Overall Messages: Government control will continue for forseeable future; possible, but not probable,changes in policy coming to allow more foreign investment; growth expected in northern and central China; intently monitor changes in policy and position yourself in advance to be able to 'go' when the situation changes.

[Jim Searing]

Vietnam: Symbolising the Growth and Dynamism of Growing Asian Economies: Envisioning Real Estate and Infrastructure Developments in Vietnam for 2008 and Beyond. Cityscape USA September 10 2008

Henry D. Fahman, Chairman & CEO, Providential Holdings Inc, Vietnam
-Mixed picture on world's economy: Inflation is rising, concerns about trade deficit, stock market.
-Vietnam's private sector is growing, with 59,000 new business registrations in 2008 signaling entrepreneurial activity
-Substantial demand for upscale residential housing that meets international quality standards

David Henry, Managing Director-Real Estate, Vina Capital, Vietnam
-Robust domestic fundamentals with $47 Billion in FDI in 2008 (so far) vs. $20B in 2007
-Population 70% under 35
-Low retail penetration, high demand
-Rapidly urbanizing population with needs for housing
-Key to invest in Vietnam is to partner with local companies, do a JV on every project
-Explore business cooperation contracts, long term leaseholds as ways to invest
-Inflation is moderating
-Being so close to China, some companies (e.g. Intel) are moving manufacturing to Vietnam as costs increase in China

Overall; Focus on city centers; be local; partner with local companies; property ownership/titling remains an issue; Vietnam deserves to be on radar in evaluating global opportunities.