On December 20, 2022 Hongkong-listed Link REIT signed a deal to acquire two Singapore shopping malls — Jurong Point and Swing By Thomson Plaza — from NTUC unit Mercatus Co-operative for $2.16 billion. The price of the purchase is an 6.1% discount to the total worth which was $2.3 billion for the two properties on December 28th 2022.
The Hill @One-North showroom located in the friendly neighbourhood of one-north in Singapore, The Hill @One-North property is a perfect home for people looking for an oasis away from the fast-paced city life.
This month Goldin Financial Global Centre (GFGC) -an 28-storey Grade-A office building located in Kowloon East, Hong Kong was sold for HK$5.6 billion ($947 million) to a 50/50 joint venture with PAG of Singapore’s Mapletree Investments and Hong Kong investment company PAG. This is the culmination of a legal battle that lasted over two and a half years, between the conglomerate in distress Goldin Financial Holdings, which Hong Kong property tycoon Pan Sutong manages.
Receivers took over the former headquarters of Goldin Financial in July 2020 when the company failed to pay its debts. There were several failed sales attempts and the HK$14.3 billion deal that was announced in September of 2020. The deal was later cancelled.
These deals are the latest instances of Asia Pacific (APAC) real property investors looking for distressed or discounted assets in the shift to more risk-taking strategies. According to property consulting firm CBRE’s 2023 Asia Pacific Investor Intentions Survey which was conducted in 2023, 31% of those surveyed are focused on opportunistic deals distressed assets, and non-performing loans, up from 26% the year prior. Additionally 60% of US$39.7 billion in funds generated by real estate funds focused on Asia Pacific in 2022 will be strategic strategies that are opportunistic — the most in the last decade.
The increasing demand for this strategy is a reaction to the current economic conditions, such as the increasing cost of financing and a moderate rate of yield growth that are reducing the value of the core strategies, according to CBRE. Greg Hyland, the consultancy’s director of capital markets for Asia Pacific, also points that investors remain cautious with regard to macroeconomic risks. He says “Despite good fundraising numbers however, the majority of investors are taking an cautious approach when they are looking for indications of yield growth and inflationary cycle of interest rates to slow down.”
The cautious expectation is likely to continue into 2023, underlying the wait-and-see attitude that investors have taken in the second part of 2022. Yet, Hyland expects investment activity in APAC to increase in the latter part of this calendar year. helped by improved clarity regarding the economic outlook and China’s opening.
Purchase intentions and the most sought-after asset classes
The survey is in line with Hyland’s optimistic outlook that most (93%) APAC institutional investors are expecting their real estate investments to grow or stay stable by 2023. The survey also revealed that high-net-worth families, individuals and private investors showed greater buying intent and a greater focus on core primary assets as well as potential deals.
The company says that manufacturing and logistic are the top desired assets that are being followed by residential and office. “While there’s a decline in interest in offices largely because of concerns over the current rate of yields however, the study shows that the majority of investors opt for offices as their primary option,” adds Henry Chin the CBRE’s global head of thought leadership and research for Asia Pacific for CBRE.
CBRE expects that top-quality premium offices located in CBDs across APAC will be sought-after due to the limited supply of space and the high demand from corporates who want better quality office space. Chin states that investors are showing more desire to invest in residential properties specifically in multifamily properties and those built-to-rent.
However the retail and hotels are still seeing less interest from investors due to the current market turmoil. CBRE claims that the less interest is a reason for more cautious prices for assets in retail with more than 60% of respondents expecting to get discounts for malls, shopping centres and high-street shops.
Just 5% of respondents to the survey stated that they would like to invest into alternative investments. However, among those who did, CBRE says that healthcare-related properties which include medical offices and life sciences — have taken over data centers as the leading option for investors. The demand for data centres slowed this year, due mainly to the properties with high carbon emissions due to their massive consumption, according to.
Top investment destinations
As for APAC investments, Tokyo came out as the most popular city to invest cross-border for the fourth year in a row as Singapore came in second. Both countries continue to be the top choice for both investors looking to invest in value and core with solid market fundamentals.
In Southeast Asia, Vietnam’s Ho Chi Minh City was placed third, and the capital city of Vietnam Hanoi is also among into the top 10. CBRE declares it believes that Vietnam continues to reap the benefits of being a China plus One destination, which has prompted an interest from investors who are looking for bargains that add value and are opportunistic in this sector.
The firm also claims Hong Kong has ranked within the top five investment destinations for the first time since the year 2020. Since the reopening of the frontier between China mainland China and more realistic valuations, investors are once again finding Hong Kong attractive, adds the report.