LaSalle fund sets sights on cheap properties

PUBLISHED : Monday, 17 November, 2008, 12:00am
UPDATED : Monday, 17 November, 2008, 12:00am

Property fund LaSalle Investment Management plans to aggressively snap up property bargains on the mainland and is looking for assets that can provide stable and long-term returns.

The property fund unit of real estate advisory and consultancy group Jones Lang LaSalle raised US$3 billion to invest in Asia in September last year, which provided it with the spending power to pick up distressed assets or cheap buildings from highly leveraged mainland developers squeezed by a clampdown on bank lending, Eric Au, national director of LaSalle Investment, said.

Mr Au, who is in charge of LaSalle's mainland office, said about 15 per cent of the capital raised had been spent so far.

'A major part of the remaining fund will be spent in China, where we see strong growth potential. We are also interested in the Japan market, which has not yet fully recovered over the past decade,' he said.

Given the current global economic environment, the fund is looking for assets with stable income and an internal rate of return of at least 30 per cent. Commercial properties such as China Plaza in Guangzhou are attracting LaSalle's interest.

A retail-commercial complex in the Yuexiu district, China Plaza is a core asset of Chang Sheng Property, whose attempt to list in Hong Kong in January failed because of the stock market slump.

Sources said the company was asking for 1.6 billion yuan (HK$1.81 billion) for the retail centre and 2 billion yuan for the newly completed office tower, which covers more than 80,000 square metres.

'The attractiveness of China Plaza is the retail portion, which can provide stable income,' said Mr Au.

'Retail sales are expected to be strong, as the government is now making efforts to stimulate domestic consumption.'

Mr Au also believes there will be continued growth in the number of middle-income earners on the mainland, a group that usually has strong spending power.

The fund's niche is to upgrade properties and enhance their value after acquiring them from mainland developers.

'If we owned China Plaza, we would add value or reposition the retail property by ways such as renovating the main entrance area, increasing shopping space on the first and second floors and improving the tenant mix of the retail centre,' he said.

But Mr Au said negotiations were not currently under way.

The fund has invested in several properties on the mainland. These include stakes in a property firm in Dalian, an office building in Sichuan and two residential properties in Shanghai. It has also invested in a hotel in Hong Kong.

'Many people think all international real estate investment funds are leaving China. We want to tell the market that we are still here,' said Mr Au.