An army of American investors has descended on Asia to take advantage of huge real estate opportunities created as a result of the Asian economic crisis.
And lots of L.A. firms are getting into the act.
"Every hotel I stay at, the lobby is full of investment bankers," said Goodwin Gaw, president of Pioneer (USA) Holdings Inc., an L.A. real estate investment firm.
Last year, more than $6 billion was invested in property and distressed loans in Asia. This year, American investors with a total of $20 billion are chasing deals there, according to Jack Rodman, director of the E & Y; Kenneth Leventhal Real Estate Group practice in Asia.
It remains to be seen how much, and how quickly, property will be snatched up as Asia continues to recover. Prices have bottomed out in some countries and even started to rebound in others. More importantly, previously restrictive real estate markets are becoming more open to outside investors.
But the perception that Asia may be recovering has slowed the pace of transactions in some countries, where sellers "are holding on and thinking the economy is going to recover," Rodman said.
Each country has its own dynamics in the foreign rush for real estate opportunities. Here is a breakdown:
One of the most active markets, with investors targeting property held by distressed companies and non-performing loans secured by real estate.
"Two years ago, there was very little (activity). Now there are a lot of people kicking the tires and making transactions aggressively on the ground, and others who are waiting and looking for the right moment," said John Tofflemire, general manager of research and consulting for the Japanese arm of Los Angeles brokerage CB Richard Ellis.
Much of the targeted property is owned by Japanese life insurance companies struggling with obligations that exceed their earnings on real estate investments. In addition, many construction companies are insolvent and willing to unload property.
Meanwhile, Japanese financial institutions hold up to $1.2 trillion worth of non-performing loans that are being slowly disposed of. "Japan is moving at a glacial speed to stimulate its real estate market," Rodman said.
In anticipation of a more favorable market, several L.A. firms have ramped up their real estate investment and brokerage activities in the past year. Along with CB, Kennedy-Wilson Inc. and Colony Capital are in search of acquisitions.
"Our perception is that Japan is at or near the bottom of the (real estate cycle). We're not seeing the rapidly declining prices we were having a few months ago," said Freeman Lyle, Kennedy-Wilson's chief financial officer. "Vacancies for commercial properties are tight, but rental rates have declined."
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