Europe is a crowded continent. Quality, undeveloped land is scarce, partially due to “green belt” policies that prevent cities like London from swallowing the surrounding countryside. This has historically made residential property expensive, and meant that only the very rich could afford a second home.
But over the last decade this has begun to change, as citizens of temperate European countries such as the UK and Germany have begun buying up property in coastal resorts. One sign of the growing importance of this market: Professor Michael Ball of the department of real estate at the University of Reading dedicated an entire chapter in his RICS European Housing Review 2005 to “the second home boom.”
One key factor in the market's growth is the fact that the EU has given Europeans the right to live in another country, as well as providing funds for infrastructure development in areas such as rural Spain. The property boom has increased the amount of equity available to Europeans that already own a home, while the rise of budget airlines has made international travel cheaper – the report notes that areas not served by those airlines, such as Turkey and the Greek islands, have a relatively small second home market.
Certain regions in northern Europe have also benefited: County Kerry, in the west of Ireland, saw a 45 percent rise in housing output between 2002 and 2003, while a growing community of Germans have bought second homes in southern Sweden. However, it is the Spanish coast that has really boomed. This is at least partly due to demographics: as Europe has become wealthier, its population has become older, creating a demand for retirement homes in the sun – what has become known as “the Florida effect.”
Between 1996 and 2003 the coastal areas outside the main cities of Barcelona, Malaga and Valencia consistently accounted for more than half of all new builds in Spain. In 2003, that region saw a total of 380,000 new houses built – more than the whole of Germany and the Benelux countries combined. A growing number of those developments are of large, enclosed estates with resort-style facilities.
However, the report also notes that by early 2004 there were signs that the market was struggling, with projects taking upwards of two years to sell. Ball notes the cautionary tale of the Algarve (Southern Portugal) holiday home market, which boomed on the back of British prosperity in the 1980s – only to crash when the UK entered a recession in 1992.
Colony buys Raffles hotel chain for $1bn
Los Angeles-based private equity real estate firm Colony Capital has purchased 41 hotels under the Raffles and Swissotel banners from Singapore-based Raffles Holdings in a transaction valued around $1 billion (€820 million). The deal includes the storied 117-year-old Raffles in Singapore, considered by many to be a symbol of national pride. In a statement, Thomas Barrack, chairman and chief executive officer of Colony, said the firm considers it their responsibility to “protect” the hotel brand's “legacy.” Earlier this year, the firm made a €1 billion investment in French hotelier Accor.
Mumbai firm launches $120m opportunity fund
Mumbai-based investment firm Anand Rathi has launched the Anand Rathi Realty Fund, the company's first private equity real estate fund, with a target of Rs 500 crore ($120 million; €94 million). The fund will target both foreign and domestic investors and will focus on rapidly developing urban markets, including Pune, Bangalore Hyderabad and Chennai. Sumit Anand, chief executive officer of Anand Rathi Venture Funds, told Business Line“Our key investment decision variables will comprise the demand supply dynamics, the promoter's background and the project fundamentals including a review of the exit options for the fund.”
AMB closes Japanese fund, hires portfolio manager
San Francisco-based developer AMB Property Corporation has closed its first Japanese real estate fund with thirteen institutional investors committing ¥49.5 billion ($446 million; €370 million) for an 80 percent interest. AMB will co-invest 20 percent, bringing the fund's total equity to more than $550 million. AMB Japan Fund I will invest in distribution facilities near high-traffic airports, highway systems and seaports in major metropolitan areas. The fund currently owns six distribution facilities in Tokyo that had previously been acquired by AMB. It will be managed out of AMB's Singapore office by Jon Willis, former real estate investment officer for the $60 billion endowment at the University of California, who recently joined the firm as a vice president.
Goldman Sachs invests $180m in theme park
US investment bank Goldman Sachs has agreed to provide Universal Studios Japan with ¥20 billion ($180 million; €149 million) in private equity funding, an investment that would make it the company's largest shareholder, although its stake will not exceed 50 percent. The city of Osaka, where the Universal Studios theme park is located, is the company's second largest shareholder with approximately a 25 percent stake. Goldman's ownership position will be in the form of nonvoting preferred shares. The Development Bank of Japan, a state-affiliated financial institution, will also inject ¥5 billion into the struggling theme park operator. The company, which has seen visitor traffic fall since its opening four years ago, will use the proceeds of the equity infusion to pay down debt.
Carlyle opens Beijing office
Washington DC-headquartered The Carlyle Group has opened a new office in Beijing, its third fully staffed office in the country. The Beijing office will initially have four investment professionals – two in the growth capital team, one focused on buyouts and one concentrating on real estate. Jason Lee, the head of Carlyle Asia Real Estate group based in Hong Kong, told a Chinese newspaper that the firm is planning to invest in the capital city's growing real estate sector. Carlyle now has a total of 57 investment professionals operating out of seven offices across Asia.