Smart moves: Why Asia-based investors want US real estate
Asia-based investors are no strangers to buying real estate. This applies to both personal portfolios, as well as institutions as part of the alternatives portion of their asset allocation.
In 2017, for example, $83.4 billion from the region was invested into overseas commercial property, according to real estate services firm CBRE. More broadly, Cushman & Wakefield’s Global Investment Atlas 2018 study showed that investors from Asia powered global real estate investments to an all-time high last year – accounting for 52% of the $1.62 trillion of capital deployed across the board.
“Asia-based investors understand real estate better than most, and their appetite for property is high,” explained Gary Tom, president for Asia at Walton International Group. “They understand the cycles and markets, and this sophistication means they don’t have a shyness towards owning property before it is developed.”
Property has clearly benefitted from the flood of ‘cheaper’ money available in the wake of a decade of quantitative easing and subsequently record-low interest rates and Asia-based investors, in particular, have sought higher-yielding assets.
Filling the diversification bucket
These same investors are also increasingly looking at alternative investment options to commercial buildings like office towers and industrial blocks.
This is where Tom believes Walton can help educate regional investors about land planning and development. “This fits with the desire among institutional investors for alternative real estate assets that are medium to long-term in nature, plus it helps to diversify more traditional real estate holdings.”
Amid the growing demand he sees for new opportunities, Tom said he believes the rigorous land research and selection process that Walton adopts across North America will appeal to Asia’s institutional investors.
At the same time, offering US exposure in this segment can deliver geographic diversity in addition to complement product diversity.
Other advantages of an asset-based offering also appeal to Asia-based investors. “Some institutions like the ‘hassle-free’ nature compared with investing in real assets,” Tom explained. “For example, they control the assets, with freehold title, which is part of our proposition, but we play the role of the on-the-ground agent.”
Tapping Asia demand
Walton’s sees Asia as a natural stepping stone for evolving and expanding its footprint. This will mean looking beyond the more developed hubs of Hong Kong and Singapore.
“We have a good business model with robust assets on offer in the US, and at the right time of the economic cycle,” he said. “Interest will continue to grow, so we want to be ready to meet this demand.”
Having opened its Hong Kong office in 1992, Tom is adamant Walton has gained the track record that institutions want to see from providers. From his perspective, the firm’s scale and governance structure has been developed over its 35-plus year history; as of March 2018, it owned just under 43,301 ha in Canada and the US.
“We take a partnership approach to how we invest and we have a relatively long time-horizon in the way we view real estate,” he added. “We are also prepared to walk away from a transaction if it doesn’t make sense for the risk profile of our business.”
More information about Walton Global Investments is available here