Investors search for yellow brick road

Real Estate Weekly, Nov 30, 1994 by Lois Weiss

Investors are always looking for new places to put their money, be it a hotel in Hong Kong or an apartment house in Alabama. Today's developers are market savvy and cautious. they've seen opportunities turn into disasters at the drop of a shoe, so to speak, in places like the Philippines, or become frustrating in a land with no owners like the former Soviet territories.

Good global investing is more than just throwing darts. It is based on reliable information collected by people with relationships in emerging markets. This is where who you know is more important than being there first. Sure, foreigners like to be wooed, but on their terms by people they have grown to trust. There is nothing like having someone on your side who knows the culture of your market and makes sure no faux pas or costly marketing mistakes are committed.

So say the soothsayers of the real estate industry who are partnering up locally from Sydney to Singapore.

Some of their observations include:

* Europe is merely coasting along, but places like Mexico, Mainland China, the Pacific Rim from Australia to Vietnam to Vancouver - and the Philippines once again - along with portions of South America and India, are bright targets in American sights.

* India is becoming the next Silicon Valley.

* Fortune magazine has named Hong Kong is the best place in the world for business.

* Latin America still has problems, but look for that to be a highlight in about 20 years.

* Korea may need help soon, in particular ferreting out problems with major construction projects that went up too fast. The Koreans point to the collapse of a major bridge in Seoul where 32 people died last month because the city failed to act on a 1993 warning that the bridge was in dangerous condition.

* George Soros and Olympia & York's Paul Reichmann are planning a major office project in Mexico City.

In order to do business you need a good partner, says Arthur Mirante II, president and CEO of Cushman k Wakefield, which has just formed an office in Hong Kong with local partners. You can't go into a country and send your U.S. pro to a totally new world and have them compete with local people in representing your clients."

Mirante is a believer in local relationships, warning A little information in the wrong hands can be a disaster. You have to be very careful."

C&W has also formed Cushman & Wakefield Worldwide to link its seven worldwide partners in a more formal business arrangement.

The C&W Hong Kong venture is called Marlan Land and includes three other prestigious local groups: Healy Baker, C&W's partner in the United Kingdom; the high-profile Hong Kong Shaw family; and Grovesnor Estate, the Duke of Westminster investment house.

Mirante says if the world trade treaty, GATT, passes through Congress it will add further impetus to what is already happening. We opened in Mexico City two and a half years ago, before NAFTA, and there were already a lot of US businesses opening in Mexico. NAFTA has just provided a security blanket. GATT will provide that for other parts of the world."

Europe Awakening

John Coppedge, director of European operations for Cushman and Wakefield, said Europe is starting to have positive signs because they are finally coming out of their recession. While there have been good investment opportunities in the United Kingdom as defined in that part of the world, he admitted that from the U.S. side, the returns at 6 percent are much lower than what they are in the states. Places like France are providing 7 percent returns. People are looking but it's not the market for the U. S. investors."

There are, however, retail development opportunities throughout Europe for development. Again we see Americans that are coming on the back of the retailers that they have done business with in the states who are entering Europe for the first time," Coppedge said. Retailers like TJ Maxx and Home Depot are coming into the UK first as the stepping stone to the rest of Europe.

There is a comfort that they have [with the developer! but they have found they need to partner up because of the zoning permission needed for...free-standing buildings outside of town with a lot of parking," he explained. "Most of the Europeans are protective of their High Street, the in-town shopping. They protect that downtown shopping so it's more difficult to get permission to go outside and get things built."

Apartment building, Coppedge noted, is just not the thing they are in the states. The cultures are different. People don't want to live in apartments the same way they won't eat frozen yogurt."

Seen around the UK are developers Trammel Crow, Tishman Speyer, the Prime Group out of Chicago, and Gerald Hines.

Australia

Majors players are also setting themselves up in Australia because of the focus on Southeast Asia. Australia is playing a more and more important role as a European conduit into Southeast Asia," said Joe Adendorff, managing director, Kennedy Wilson Australia. Cities like Sydney and Melbourne have a good infrastructure and a lifestyle that Westerners can associate ate with, he noted.