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Forum Partners sells some real estate assets in Japan to buy in China

British firm bucks the trend by pulling back from Japanese market to focus on Chinese deals

PUBLISHED : Wednesday, 27 November, 2013, 4:40am
UPDATED : Monday, 02 December, 2013, 5:06pm

Forum Partners, a global real estate investment and corporate finance firm with about US$6 billion in assets under management, is shifting its investment focus to China and selling assets in Japan.

The chief executive of the British-based firm, Russell Platt, said the mainland could easily account for "40 per cent or more" of its total investment volume in the next few years.

Platt said its US$375 million Asia Realty Income Fund III, raised last year, had a China exposure of about 20 per cent. It invests in small to medium-sized property companies in Asia in need of recapitalisation or repositioning.

Established in 2002, Forum Partners invests in real estate companies that are privately owned and plan to list on stock exchanges. It also invests in real estate securities, such as real estate investment trusts, and debt investments.

Platt said Forum Partners had invested in Japan after the global financial crisis "as prices were down quite a bit", but was now pulling back slightly.

In the first half of this year, investors spent US$10.6 billion buying commercial properties in Japan, up 50 per cent from a year ago, property consultancy Jones Lang LaSalle said in a report.

"Everyone is going back to Japan. We are actually selling," Platt said.

Forum Partners exited some of its Japanese assets earlier this year through Galileo Japan Trust, which listed on the Australian stock exchange.

While the company said it continued to be confident about the outlook for Japan, it is looking to increase exposure to China, where it is currently underweight.

"We see opportunities in China," Platt said, his confidence supported by rapid urbanisation and growing incomes.

Global investors had some concerns about the possible bursting of a property bubble in China and whether its high growth rate was sustainable, Platt acknowledged.

"We share some of these concerns," he said. "Our eyes are open to the risk of China. But we have made the argument that those risks are priced in the current values.

"What do we like in China today? We will continue to like residential development, particularly for middle-market and for real end-user demand. I would be disappointed if we did not make additional commitments in the next year to the residential sector."

Platt also sees potential in the commercial sector, mainly office properties, logistics facilities and two- to three-star hotels, as well as housing for the elderly.