JPMorgan plans to invest more than $1 billion in
Asian real estate over the next three years, hoping to fill a gap as
Indian and Chinese developers crave funds and rival investors recoil
from property markets.
The investment bank, which has fared
better than some Wall Street rivals because of smaller exposure to US
investments, is using its special opportunities group
to finance Asian property firms and their projects.
fantastic opportunity for us at a time when a lot of our competitors
are scaling down because of difficulties accessing their balance
sheet," the group's Asia real estate head, Bryan Southergill, told
Reuters in an interview.
Many Chinese and Indian developers
are struggling to complete ambitious projects because local banks have
clamped down on lending to the construction industry and a stock market
slump has closed off equity raising through initial public offerings.
investors are also shying away from markets where risks, as well as
returns, are traditionally high. But because of a shortage of funds,
developers are starting to offer plum deals.
"Last year many
private equity players were clamouring for exposure in India and China
but it was hard to get in," Southergill said. "Now, sellers'
expectations have come down and what they're asking for is much more
reasonable, but the private equity and hedge funds have really pulled
back and are more cautious."
In China, the lending clampdown was
inspired by a government bent on cooling a market where average home
prices have doubled since 2002 and high-end apartments prices have
risen much more.
Beijing has also raised interest rates, imposed
taxes on capital gains and land appreciation, stopped non-residents
from buying apartments and employed a "use it or lose it" policy to
deter land speculation.
Southergill, who worked for Morgan
Stanley's property investment arm before joining JPMorgan, struck a
cautious note despite his ambitious spending plans.
"In the next
three years we aim to invest north of a billion dollars in this part of
the world, if market conditions allow," Southergill said, adding the
investment would be split roughly equally between India and China.
cautious about equity, aggressive on mezzanine financing, and we'll
take our time during this period of market consolidation to build
long-term relationships with companies we're going to invest with."
JPMorgan has taken two, $50 million equity stakes in Indian IPO-hopefuls.