AEW Capital Management, a $43 billion real estate investment manager of listed securities and real estate private equity, is on the process of deploying a PE fund worth $560 million, targeting Asian property. With leverage, the firm which is based in Massachusetts can deal out around $1 billion to the Asian region, on the condition that it can search for the right investments.
The commercial space in the Lion City is one of the most striking areas nowadays, said Peter Wittendorp, AEW head for Asia-Pacific in Singapore. Rents have fallen but price decreases are not as much as what buyers expect. He also argues that the market has been oversold and bid/ask spreads have tightened.
Wittendorp now sees private wealth coming back to pick up bargains in the office spaces in Singapore. As the debts of developers roll over, they are becoming more considerate about pricing. "The commercial rental side has clearly bottomed," he said. "Yes, rents are low, but people are signing leases again."
The investment firm AEW, a unit of Natixis Global Asset Management, is disregarding the residential market of Singapore where high-end property prices are striking record levels. The firm might consider properties that cater to the mass market, but prices in that sector are also beginning to surge.
AEW also favors China and Hong Kong’s retail commercial spaces, where the firm can find deals. The major opportunities in HK tend to be limited within the community of the local developers, and outside capital is not usually permitted in. However, according to Wittendorp, there are other appealing smaller projects both from Hong Kong and China.
Wittendorp is also enthusiastic about the logistics sector, both in China and regionally. "If the world recovers, people need products, and the industrial sector is where those products are made," he said. The challenge is to shun buildings with overly specific manufacturing and commercial purpose, in case a certain business transaction fails to recover.
Jeffrey Furber, the Boston-based chief executive of AEW, refuted the idea that real estate in Asia is experiencing a bubble. "Sure, you read about a record transaction in the newspapers, but the same goes for London and New York. A bubble comes from too much credit, too much lending — Asia’s never suffered from that," he said.
Furthermore, Furber says Asian real estate markets are the only markets that are functioning normally. Leasing and lending activity is weak in Europe and remains on hold in the United States.
AEW closed a private equity fund in Asia the previous year with a two-year extension and eight-year maturity. Another two years has been granted to the firm to completely deploy its cash.