APAC capital continues global investment push
APAC capital continues global investment push
10 OCTOBER 2017 7:29 AM

Chinese capital and investors from Asia’s other regions are still actively pursuing hotel development and acquisitions outside of the Asia/Pacific region.

LONDON—Despite a government mandate that limits Chinese state-owned enterprises’ outbound capital, sources said capital originating from the Asia/Pacific region is still active and targeting global hotel assets.

Panelists who participated in “A focus on offshore investors: Where are they buying and are they here to stay?” at the Hotel Investment Conference Europe, better known as Hot.E, said investors throughout the Asia/Pacific region are hungry for deals.

As far as where the money is headed, panelists warned hoteliers not to assume that Asia/Pacific capital is focused solely on Europe and North America.

Baron R. Ah Moo, managing director of BLI Capital, said London is a little overrated.

“The (United Kingdom) has to realize it is competing globally,” he said. “Conservative money, and much from Asia is, now is looking at places such as Africa.”

Ah Moo said BLI represents a high-net-worth individual who plans to spend $40 million in Europe but remains interested in the Middle East and Asia/Pacific.

David Ling, head of strategic development for Singapore-based real estate investment trust CDL Hospitality Trusts, said all the varying business fundamentals around the world have been positive for CDL Hospitality Trusts. The REIT has been investing in Europe for the last three years, including deals in 2017 for the Munich Pullman for €104.7 million ($123 million) and Lowry Hotel, Manchester, for £52.5 million ($69 million).

“Disruption creates opportunity,” he said. “We’ve made money.”

Ling said CDL Hospitality Trusts, part of City Developments Limited, also owns approximately 65% of Millennium & Copthorne Hotels. On 9 October, Millennium & Copthorne Hotels published a news release on its website that announced CDL’s offer to buy its remaining shares and thus delist M&C from the London Stock Exchange.

Erik Jacobs, partner with HORECA Investment Partners—a Thai family fund with hotels in Southeast Asia and Australia and now a mandate to move into European gateway cities—said he looks at European assets from their real estate perspectives, not necessarily their operating ones.

“We can play across sectors from hotels to real estate. We are long-term players,” Jacobs said.

Structural shifts
Investment opportunities differ depending on the structure of the firm and capital coming into inbound markets, the panelists said, and there is room for everyone if the capital stack is well thought out.

Ling said REITs tend to be more risk-averse, and Singapore placed much in the way of regulations on REITs based there.

“We’re not buy, fix and sell, rather buy and hold,” he said. “We act more as a hybrid between an operating fund and a pension fund. We sit between those.”

Jacobs’ private investors see capital as having no duration, he said.

“Capital needs creativity, and on the real estate side there is no difference to that,” Jacobs said. “We’re competing with private equity and institutional capital, and when you work with growth capital, it is good to work with family money, as we can decide quicker.”

Overseas capital is shying away from spades in the ground, panelists said.

“There is a lot more risk in development than 10 years ago,” Ah Moo said. “The days of developing green fields in Europe is over for private equity.”

Jacobs said his company’s investments are favoring leases over management agreements.

“All the upside is fully priced,” Jacobs said.

Ah Moo said his capital was increasingly interested in buying into management and loyalty.

“Many of my investors have no hotel experience, so they’ll want to invest in experience and distribution,” Ah Moo said.

Jacobs said that one strategy is to concentrate on a sector and then find the right fit. White-label management and hostels are two growth areas for Southeast Asian investors. Investment from the region is learning fast how to be flexible, he added.

“The usual plan was to invest in the store, realize a few points in performance … there was no play in operations, but that is changing,” Jacobs said.

Scale is becoming important for investors, too, panelists said.

“Horizons are longer in term, and there is the ability now to play one market against another in your portfolio,” Ling said.

“The big question is over if and how you repatriate your capital,” Ah Moo said.

Chinese pause
As to whether Chinese money would return, panelists said it is still likely.

“There is big pomp and circumstance in China,” Ah Moo said.

The restrictions on Chinese companies also appear to be only on deals with a value of more than $100 million, panelists said.

Ah Moo said it is unlikely Chinese-held Western assets would be allowed to go for cents on the dollar and mentioned in particular Anbang Insurance Group’s 2014 buy of the Waldorf Astoria New York.

“Anbang is an insurance company, so a bad deal would mean the (Chinese) people pay,” he said. Anbang “will hold, negotiate and work assets through the system.”

Ling said the Chinese investment landscape will continue to take shape.

“This is all part of the process,” Ling said. “The next wave of Chinese investment will be more reliant on international valuations.”

Europe remains in all of the region’s spotlights, panelists said.

“Hong Kong just sold a cap park for $3 billion, so London is still a steal,” Ah Moo added.

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