PERE Forum Asia 2010: International GPs must offer more than just money

As the prominence of domestic capital continues to boom in market like China, international fund managers must look to other areas to compete on deals.

International GPs must rely on their real estate expertise rather than their equity resources if they are to compete with more prominent domestic buyers in Asia, delegates at PERE’s third annual forum in Hong Kong heard today.
That was the view of a panel of GPs at the PERE Forum: Asia conference at the Four Seasons hotel after they were questioned about how they could compete with capital-rich domestic buyers.
John Saunders, managing director, Asia portfolio at MGPA, said: “It’s about what else you can bring to the table other than cash. We have done little in residential in Asia so we have focussed on retail and offices where we can bring skills such as development, planning, leasing and management.”
Richard Price, chief executive officer for ING Real Estate Investment Management, highlighted the challenge faced by international firms, which must meet their fiduciary duties but, as a result, can lose out on investments to local buyers with no such constraints. He said: “That is the challenge we have as a manager of other people’s capital – competing with buyers which don’t have such complexity of process.” He added: “I can think of a deal which was taken away from us in the time it took for us to put together an investment committee.”
Cheng-Soon Lau, managing director of Invesco Real Estate, Asia, added: “Domestic players can produce a cheque before we have even have a contract in place.”

Goodwin Gaw, managing principal of Hong Kong and Shanghai-based Gaw Capital, countered by stating: “In China, we don’t have the due diligence period so we have to do all of our work beforehand [to compete]. It’s not like the US where you have the luxury to do this. Increasingly in China, that is what you must compete with.”