Inside Asian Gaming

15 14 L aSalle Investment Management is a key player in private equity property devel- opment. It manages US$44 billion worth of real estate and real estate securities around the world on behalf of institutional and high net worth investors. It began putting money into the Asia-Pacific region in 2000 and now has US$5.3 billion invested locally. The value of the Asia-Pacific fund grew 17.7% year-on- year in the first half of this year, mirroring the general GDP increase of China, says Man-Yik Chiu, the fund’s National Director, covering Greater China. The fund has just announced its first in- vestment in Macau, a four-tower 50-storey Casino-Driven Property Prices One of the world’s largest real estate funds says it is actively targeting investment in Asian casino jurisdictions because of above-regional-average growth in property values associated with the gaming industry luxury housing complex marketed under the name Bel-Lago (Italian for ‘beautiful lake’). It is scheduled for completion in 2010. The site is located on the edge of the Macau penin- sula between NamVan and Sai Van Lakes and close to Macau Tower Convention and Enter- tainment Centre. “Macau’s new casino market has brought in outsiders and put pressure on hous- ing stock at the luxury end. More and more people are requiring good quality residential property,” says Mr Chiu. “Bel-Lago won’t be part of Macau’s gam- bling centre, but it will only be two minutes’ drive away. It is close enough to be conve- nient but far enough away to offer a quiet, pure, environment surrounded by lovely views.” CLSA Asia-Pacific Markets, a leading pro- vider of brokerage and investment banking services in the region, is bullish on luxury property in Macau according to its latest report, ‘Macau Mania II’, compiled by its se- nior investment analyst Gavin Ho. He says although the number of Macau property transactions fell slightly in 2006 compared with 2005, the average value of individual deals went up. Mr Ho writes: “The CLSA/Midland survey of 235 potential buyers of Macau properties, in March 2007, reveals strong investor sup- port for high-end properties and a growing local demand for the mid end. We identify strong support from the sizable incoming workforce and rapidly rising income. While the 7,000 new units completed over the next two years look fully digestible, we forecast property prices could reach HK$5,000 per square foot in the mid segment and more than HK$9,000 per sq. ft in the higher end by 2010.” LaSalle is spending HK$2,500 per sq. ft on its Bel-Lago property, but declines to discuss what margins it plans to operate on. It says it has not yet priced the 500 units, which will range from 800 sq. ft studio flats to 3,000 sq. ft four-bedroom apartments. Luxury support Joseph Tang, International Director at Jones Lang LaSalle, the property consultancy and sister company to LaSalle Investment Man- agement, hints though that prices are likely to be above HK$5,000 per sq. ft. He says: “I hate to quote other people’s projects, but if you look at One Central Resi- dences, the project recently launched jointly by Hongkong Land and Shun Tak in Ma- cau, they very quickly sold that for around HK$4,800 [per square foot] on average. These properties are now trading at around HK$5,500 to HK$6,000 [per sq. ft] and are still seeing strong support, so I think the market can support the really, really top luxury mar- ket; because Macau is lacking Grade A resi- dential of really international standard. “Resale values for One Central will per- haps be used as our guidelines or as a com- parable. We won’t be following that exactly though. We will be aiming to achieve higher yield than that.” Mr Chiu adds, “A lot of people are now paying attention to Macau, aiming to buy as an investment. They are probably not going to live there. The properties will probably be leased out, and the target market will be the new expat community.” Investment aim The CLSA/Midland survey appears to confirm this view. Fifty per cent of Macau property buyers surveyed said they were making the purchase as an investment rather than as a family home. Among those responding to the sur- vey, 40% described themselves as Macau residents, 26% as Hong Kongers and 26% as mainland Chinese, with the remaining 8% from other jurisdictions. Mr Chiu says recent tightening of the in- vestment visa laws in Macau making it hard- er for house buyers to claim residency in the territory and a corresponding tightening of rules on mainland residents seeking to emi- grate to Macau and other jurisdictions had not dampened demand for luxury units. This is probably because many buyers are happy to be absentee landlords. Usual considerations CLSA’s Gavin Ho suggests that, as usual, product and location will be key to growth in property values. He believes LaSalle has Investment 50% Self use (first time buyers) 29% Reasons to buy a property: CLSA/Midland Macau survey Self use (upgraders) 21% Transaction and average value per transaction 25,000 20,000 15,000 10,000 5,000 0 No. transaction Value Avg value per txn 2001 2002 2003 2004 2005 2006 (units) (Mptcm) (Mptc’000) 1,200 1,000 800 600 400 200 0 Source: Census and Statistics, Macau

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