Tuesday, May 5, 2009

Aussie fund sees growth in Asian projects

(SYDNEY) A US$5 billion Australian pension fund is looking at property development projects in Asia that it believes will allow it to capture future growth when an economic recovery kicks in, its chief executive said yesterday.

Hostplus, a pension fund for hospitality industry employees, has made investments in projects in Singapore and is considering others elsewhere in Asia, betting that developments rather than fully-leased properties will give it an advantage when demand for offices and retail space picks up.

'In Malaysia, we are looking at a retail opportunity with one of our investment partners. We have a number of opportunities that are presenting themselves in Japan in the commercial sense, in the industrial area,' Hostplus CEO David Elia told Reuters in an interview.

Hostplus seeks an internal rate of return (IRR) of 12-15 per cent for property development projects, Mr Elia said.

In his opinion, the worst may be over for Singapore's economy.

'It's probably the first country that's probably been hardest hit in terms of the Asian region. We suspect that it's probably the first country to come out of it as well,' he said.

'We would like to think that once the economy recovers . . . we will be well positioned to take advantage of all that.'

Mr Elia noted that the supply of new buildings worldwide was limited due to tight lending, and construction costs have come down substantially, pointing to good opportunities for investing.
Australian pension funds have been hit hard by write-downs on unlisted property holdings as property value continues to fall, and Mr Elia said Hostplus had had to write down some of its assets.

It allocates 18 per cent of its funds to property, 4 per cent of which is in overseas markets.
'Because we have strong liquidity coming in, it does put us in a privileged position to negotiate tremendous outcomes.

'There are fantastic opportunities for our members going forward,' Mr Elia said. -- Reuters

Source: Business Times, 5 May 2009

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