Euro Properties Quarterly Newsletter 2017-Q3
This Euro Properties Quarterly Newsletter, aims to update our partners, co-investors and friends on recent initiatives we have undertaken at the firm. Through this quarterly publication, we hope to provide you with an overview and update on our most recent investment strategy, geographies of focus, investments made and investment strategy going forward.
Commercial property in the U.K. capital is in flux, with the value of high-end office buildings in the main financial district rising even as rents fall. By comparison, assets with a risk of vacancy or that require development have declined in value as investors avoid riskier properties following the Brexit vote.
The house view is that the value of Grade A commercial properties in the City of London could fall as much as 10% following uncertainty surrounding the U.K.’s decision to leave the EU affecting the local economy. That said, we view this uncertainty as opportunity given the lack of quality office spaces in the West End and moderate demand in the market keeping rentals in check for the near future, and therefore have deployed our own capital in acquiring a commercial asset “Verulam Gardens” on 70 Grays Inn Road in 2Q2017 for an attractive yield and capital value psf price. Specifically in London, we have focused our resources on sourcing and acquiring commercial assets in the West End with tenants more in the Legal, Creative and Technology related spaces, who are seemingly less affected by Brexit’s impact on the economy on industries such as Finance.
In addition, we continue to look at commercial and retail assets in major cities in the regional U.K. who may benefit from the effects of Brexit and large financial service companies moving their resources out of London, to cities such as Liverpool, Manchester, Glasgow, Edinburgh and Belfast; mainly due to the attractive rental yields compared to Central London. In Glasgow, we have jointly acquired a Grade A commercial asset “60 York Street” neighboring the Glasgow Central Station, which we believe has the potential for an uplift in capital value and rental reversion possibilities.
Australia continues to be an area of interest for Euro Properties. Despite some signs of curtailing investments from China to Australia, we have noticed continually strong investments from local Australian groups besides from other parts of Asia’s especially HK and SG, whom have been very active in their purchase particularly in Sydney. Australia is set to benefit with the recovery of commodity pricing and the continual influx of foreign investments.
With land and projects sold at above valuation with record price, Sydney is also benefiting from tight market supply in both residential and commercial sectors, some of which was results of the building of new Sydney Metro. In addition to new infrastructure projects, Sydney is aggressively looking at ways to uplift land density to house its growing population, which has helped to prop up the pricing of new developments. EP has been actively sought for investment opportunities in Sydney’s city center, high-end suburbs, and in other city centers such as Melbourne where certain buildings are offering at or below replacement costs.
Our current investment Parkside Willoughby (Channel 9) property has seen continual price appreciation and is currently in Stage 2 Development Application with uplift in the project density. We are continuing to search for new opportunities in both the CBD with boutique office building and in Chatswood where both projects have potential upside in density uplift and good repositioning of the present property.
In Malaysia, we continue to see an opportunity with the low currency, macro-economic environment and value at this point in the real estate asset cycle posing an interesting option for real estate investors. The country is set to benefit from more than US$200Bn worth of Chinese infrastructure and real estate investment as part of the “One Belt One Road (OBOR)” initiative due to its strategic location. Euro Properties has been working on several prime real estate projects in Kuala Lumpur in the KLCC area and adjacent to the Palace of Malaysia, which we are extremely excited to share with our existing and new partners given the potential we see in the market.
In August 2014, Imperial Pacific International was granted a 25-year license to build and operate a casino on Saipan with an option to extend the license for another 15 years. Saipan is the capital of the Commonwealth of the Northern Mariana Islands (“CNMI”) of the United States in the western Pacific Ocean, is strategically located as the closest archipelago of United States to Asia. In addition, Best Sunshine committed to spending ~US$7.0Bn on the island to build further hotel rooms, casino facilities and to promote the local tourism after being awarded this license. So far, the VIP gaming numbers have been exceptional and outperformed all market expectations, with the local economy and Real Estate also benefitting from this injection of capital and uplift in tourism. Within 2 years of operations, Saipan has emerged as a gaming Mecca particularly for those in South-East Asia due to its proximity to major Asian cities such as Beijing, Shanghai, Hong Kong, Tokyo and Seoul; not to mention its other attractions such as its favorable tropical marine climate and superior natural attractions. The Visa Free program for Chinese Tourists has yielded exponential visitation growth for the island, and Real Estate assets are relatively undervalued compared to Mainland U.S.
On Saipan, we are currently gathering interest for our potential fund focusing on investing in Saipan Real Estate, of which we have received an overwhelming response from Chinese and other Southeast Asian investors alike due to the high growth potential. Our focus is on purchasing rental yielding residential assets at close to or below replacement value, a strategy we view as being ideal for the island given the increasing demand for residential properties from locals and expats alike and extremely limited supply. The first phase of the casino plans to employ up to 3,000 staff alone, which supports this surge in demand, with more hotel and tourism projects set to come online in the near future. We believe that this supply and demand imbalance presents a huge opportunity for investment on this island which is part of U.S. territory.
The projects can be directly linked to our website:
Should you have further queries on our newsletter above or on specific projects and initiatives, please reach out to the team below:
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