MGPA sees $1bn in office property

SINGAPORE: Property investment firm MGPA has a warchest of more than $1 billion to invest in new Asian and European property and sees Tokyo offices as one of its top picks, Group CEO Simon Treacy said on Wednesday.

But the firm, 56 percent owned by Australia's Macquarie , is wary of Hong Kong where it believes the office property market is set for a major correction as China's economy slows and US interest rates begin to rise.

"We think Hong Kong is a bubble looking for a pin and that it could represent a great buying opportunity in 18 months' time once China continues to slow down and goes through a soft landing and interest rates go up in the US," Treacy told the Thomson Reuters Global Real Estate and Infrastructure Summit.

"Hong Kong's property market will go through a major correction next year sometime," said Treacy, whose firm currently has about $11 billion in real estate.

Treacy said MGPA's focus in Asia is to seek older Tokyo office buildings that it could refurbish and re-position. It is cheaper to buy an existing building than to buy land and build a new one, he said.

The firm is also keen on malls in smaller Chinese cities because of the country's rapid urbanisation and consumption growth.

A large part of Japan's problems stemmed from weakness in exports arising from the financial crisis as well as the disruptions from the March earthquake and tsunami, Treacy said.

"We think all the bad news has been factored into pricing, of both equities and real estate. In the coming quarters, we should see a quite sharp rebound in a lot of the (economic) indicators."

Treacy declined to comment on MGPA's fund-raising plans, citing regulatory restrictions, but said the firm achieved an annualised internal rate of return of 18 percent over the last 10 years from the sale of over $6 billion of real estate.

MGPA currently has more than $500 million in equity that has not yet been invested, and that, when combined with debt, will allow it to buy over $1 billion worth of real estate assets.

Copyright Reuters, 2011