MACQUARIE Global Property Advisors (MGPA), which has invested about $4.5 billion in Singapore real estate in the past 18 months, is optimistic about market prospects and reckons demand for office space is underestimated.
‘Singapore is a primary market and we like it,’ chief executive (Asia investments) Simon Treacy told BT in a recent interview. ‘We’re looking to invest in all sectors – residential, office, retail.’
Mr Treacy does not share the concern in some quarters that Singapore may face an over-supply of office space post-2010 because of the completion of several major projects.
‘You can’t look at the future of Singapore by looking at the rear-vision mirror,’ he says. ‘Singapore has moved into a different gear. It’s got a more robust economic platform and there are new demand drivers that this market hasn’t seen before.
‘Wealth creation is one of those sectors that will continue to flourish very quickly. Even if Singapore picks up 10 per cent of Switzerland’s wealth industry, there will be very significant growth in the size of the sector in Singapore.’
Another reason the office market will continue to experience strong take-up is that ‘Singapore’s capital markets will grow more than what could be expected by looking at previous trend lines’, Mr Treacy says.
‘It’s now on a new curve. I think Singapore is going to take market share (in the capital markets) from Tokyo, Hong Kong.
‘I see Singapore as being almost the jewel in the Asian crown at the moment. We like the corporate governance, the shifting of gear over the past couple of years to really make Singapore operate at a very different level.’
MGPA-managed funds were the biggest real estate investors in Singapore last year. Their acquisitions here to date include two land parcels at Marina View bought at Urban Redevelopment Authority land sales, 8 Shenton Way (formerly known as Temasek Tower), 12 floors of Springleaf Tower, which MGPA has since sold for a handsome gain, units at 8 Napier condo near the Botanic Gardens, and the Cascadia development in Bukit Timah.
Mr Treacy notes that prime-grade Singapore office rents are expected to appreciate between 10 and 25 per cent this year after last year’s 80-90 per cent hike.
‘I think businesses this year will be more careful over their decisions, but over the medium term, the average rent and take-up will be stronger and there will be ongoing rental growth in this market,’ he says.
‘It’s important to point out that the sectors that are growing in Singapore are those that require international-grade office space and environments to attract the quality people, particularly expatriates, who are going to be required to fuel the growth in this economy.’
On prospects for the Singapore residential sector, he says: ‘It’s going through an interesting growth phase because there’s a strong influx of expatriates. We’ve also got a lot of Singaporeans returning to live and work in the country. And you’ve got a generally positive workforce that’s wanting to get ahead and move upstream. Affordability still seems to be in check. So fundamentally, the outlook is still quite solid.’
As for MGPA’s likely target investments in the housing sector, Mr Treacy says: ‘We target sweet spots. That might change over time, but we certainly see good demand for top-end, best-of-class residential. We also see demand at the top end of the mass market like Cascadia. Again, it’s all about location, location, location.’
He acknowledges the current sub-prime jitters but views these as ‘disruptions that will bring opportunities’, saying: ‘We think the economies that are well thought-through, and with good governance, will be the ones that will float through to the top quickest.’
Viewing Asia as the world’s economic growth engine, MGPA particularly likes Singapore and Hong Kong for their transparency, maturity and growing capital markets.
MGPA is a private equity real estate fund management company that is 49 per cent owned by Macquarie Bank of Australia and 51 per cent owned by MGPA senior management including Mr Treacy. It has more than US$10 billion of assets under management and operations in Asia and Europe.
Overall, MGPA’s leverage on a regional basis is ‘quite conservative’ at about 60 per cent.
On Marina View land parcels A & B in Singapore, Mr Treacy says there are no current plans to team up with joint-venture partners to develop them. Both plots have minimum stipulated office components and plot B also has a minimum hotel component.
‘We’ve closed the purchase of the sites with debt from banks, including major Singaporean banks,’ he says.
8 Shenton Way is being spruced up in phases to create more retail space and a new drop-off area, as well as upgrades to the lobby and entrance to Tanjong Pagar MRT Station.
‘It’s a long-term investment,’ Mr Treacy says when asked if MGPA plans to sell the asset.
Asked whether MGPA has reached its allocation limit for Singapore real estate, he says: ‘We have lots of allocation for the right investments’.
Source : Business Times – 18 Mar 2008
