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‘I am extremely happy with RatPac’s progress’ … James Packer is expanding his production company’s film and entertainment business in the US, China and Asia. Photo: Darrian Traynor

James Packer has cemented his position as a Hollywood player after securing almost a quarter of a billion dollars in backing for his Los Angeles-based production partnership, RatPac Entertainment.

The company, which Packer created a year ago in partnership with filmmaker Brett Ratner, has closed a deal with Bank of America Merrill Lynch for a credit facility worth $US150 million ($169.54 million).

RatPac says it now has a total capitalisation of up to $US225 million ($254.3 million).

The company, with Dune Entertainment, announced a multi-year agreement with US studio Warner Bros in 2013 to co-finance as many as 75 films.

The Alfonso Cuaron film Gravity was one of the early financial beneficiaries of that agreement.

It went on to gross more than $US700 million ($791.17 million) at the box office from a $100 million ($113 million) budget.

Another film backed by the fund was The Lego Movie, which has grossed almost half a billion dollars off a budget of $US60 million ($67.81 million).

Though Bank of America Merrill Lynch is the sole agent in the new RatPac deal, it represents a syndicate of American banks, including Atlanta’s SunTrust Bank, the Beverly Hills headquartered City National Bank and the Japanese-owned Union Bank.

“I am extremely happy with RatPac’s progress,” Packer said in a brief statement.

“The company is quickly expanding its film and entertainment business in the US, China and Asia.

“This credit facility is critical to RatPac’s key partnership with Warner Bros and we will continue to work hard to deepen and strengthen this relationship in the future.”

RatPac’s partner, Dune Entertainment, is owned by Steve Mnuchin, the founder of OneWest, a California-based regional bank, and the investment company Dune Capital Management.

When the RatPac-Dune-Warner Bros deal was announced in 2013, the studio’s Chief Executive, Kevin Tsujihara, said it gave the studio “increased strength and flexibility … and an even greater ability to manage risk.”

Henry Sapiecha

For years, wealthy Chinese have been transferring billions worth of their money overseas, snapping up pricey real estate in markets including Australia, the US and Canada despite their country’s currency restrictions.

china flag flying in front of bank building image www.acbocallcentre (2)

Now, one way they could be doing it is clearer. Last week, when China Central Television leveled money-laundering allegations against Bank of China, the state-run broadcaster’s report prompted the revelation of a previously unannounced government program that enables individuals to transfer their yuan and convert it into dollars or other currencies overseas.

Offered by some banks in the southern province of Guangdong, across the border from Hong Kong, the trial program was introduced in 2011 for overseas property purchases and emigration and doesn’t constitute money laundering, Bank of China said in a July 9 statement. The transfers were allowed by regulators and reported to them, the bank said.

“What it shows is the government has been trying to internationalise the renminbi for a lot longer than we thought,” Jim Antos, a Hong Kong-based analyst at Mizuho Securities said, using the official name for China’s currency and referring to policy makers’ long-stated goal of allowing the yuan to become freely convertible with other currencies. “I’m rather encouraged by this news because this is the way they need to go.”

Currency Controls

China’s foreign-exchange rules cap the maximum amount of yuan that individuals are allowed to convert at $50,000 ($53,400) each year and ban them from transferring the currency abroad directly. Policy makers have taken steps in recent years, including allowing freer movements of capital in and out of China, as they seek to boost the global stature of the not-yet-fully convertible yuan.

“There’s a silver lining in this incident as it may force the regulators to address the issue in a more open and transparent way,” said Zhou Hao, a Shanghai-based economist at ANZ. “This is an irreversible trend.”

The issue came to light after CCTV said Bank of China helped customers transfer unlimited amounts of yuan abroad through a product called Youhuitong, which means “superior foreign-exchange channel.”

Positives, Negatives

The program is another sign that China is testing methods to allow outward yuan flows before full convertibility, May Yan, a Hong Kong-based analyst at Barclays Plc, said by phone. The goal has been announced by policy makers since the 1990s, and is a step toward stated plans to make Shanghai a global financial capital by 2020.

“For an experiment, you want to see if there’s any positives or negatives,” Yan said. “When the bank or the regulators can accumulate that experience, then they will decide if they want to move forward, or broaden it or shut it down.”

The central bank in February unveiled rules to make it easier for companies with operations in Shanghai’s free-trade zone to move yuan in and out of the country, a further loosening of controls on currency flows. The yuan surpassed the euro as the world’s second most-popular currency in trade finance in 2013, according to the Society for Worldwide Interbank Financial Telecommunication.

The Guangdong branch of China’s currency regulator, the State Administration of Foreign Exchange, picked Bank of China, China Citic Bank and a foreign lender to let individuals transfer yuan abroad in a trial the banks were told not to promote, Time Weekly reported in April 2013. A Beijing-based Citic Bank press officer declined to comment on the program.

$3.4 Billion Estimate

While Bank of China didn’t provide figures, the 21st Century Business Herald estimated the lender has moved about 20 billion yuan ($3.4 billion) abroad through Youhuitong, citing people with knowledge of the trial program. “Many commercial banks” in Guangdong offer a similar service, Bank of China said in its statement, without naming them.

Today, a link on CCTV’s website for the report on Bank of China led only to advertisements. A spokeswoman for CCTV’s international relations department, which handles foreign media inquiries, didn’t immediately respond to an e-mailed request for comment on why the story appeared to no longer be available.

The People’s Bank of China and SAFE didn’t reply to requests for comment. The central bank is “verifying” facts related to media reports of bank money-laundering, the official Xinhua News Agency reported July 10, citing a PBOC spokesman.

Youhuitong Suspended

Youhuitong has been suspended while the PBOC and its anti-money laundering bureau request records of all previous transactions, according to a person familiar with the product, who asked not to be identified because he wasn’t authorised to speak publicly.

Transfer approval for Youhuitong customers usually takes several weeks to a month, the person said. They need to provide documents showing how the money to be transferred was obtained, such as tax-payment receipts and proof of income, as well as a property-purchase agreement or proof of emigration, he said.

Youhuitong customers would typically deposit yuan with Bank of China at least two weeks before the transfer, the person said. Once approved, the customer and the bank agree on an exchange rate before the funds are moved to an overseas account designated by the customer, he said. Money destined for real estate would go directly to the property seller’s account to ensure the cash won’t be misused, he said.

A Beijing-based press officer for Bank of China declined to comment. Industrial & Commercial Bank of China  and China Construction Bank, the nation’s two largest banks, declined to comment on whether they offer similar products.

Another Way

HSBC, which runs the largest branch network among foreign banks in China, offers its Chinese clients another way to access offshore mortgages while avoiding the cap on foreign-exchange conversion, according to a person familiar with the mechanism, who asked not to be identified without having authorisation to speak publicly.

Customers deposit yuan with HSBC’s mainland unit or purchase its wealth-management products, and the bank’s overseas branch then issues a foreign-currency denominated mortgage using the China deposits as collateral, the person said.

“We seek to abide by the rules and laws of the jurisdictions and geographies in which we operate,” said Gareth Hewett, a Hong Kong-based HSBC spokesman.

Affluent Chinese have been moving money overseas in search of greater investment returns. China’s benchmark stock index has tumbled 66 per cent from its 2007 record, while the government has clamped down on property lending to rein in rising prices.

Spending up in Australia

Chinese buyers, including people from Hong Kong and Taiwan, spent $US22 billion on homes in the States in the year through March, up 72 per cent from the same period in 2013 and more than any other nationality, the National Association of Realtors said in its annual report on foreign home purchases.

“Clearly the property market wouldn’t nearly be so robust as it is today without mainland money,” Mizuho’s Antos said. “How did they do it? With Bank of China’s help. There has been a tremendous amount of mainland money flowing offshore and it couldn’t have happened without” official approval.

And Chinese have become the biggest investors in Australia’s commercial and residential property, with purchases surging 42 per cent to $5.9 billion in the year to June 2013, according to the Foreign Investment Review Board.

Vancouver’s real estate market has also seen the impact, having been “fueled tremendously in the last couple of years by high-end wealthy Chinese and Hong Kong buyers,” according to real estate agent Malcolm Hasman.

China needed to improve its oversight of capital flows after $US2.7 trillion in unexplained funds moved overseas in the decade prior to 2012, Anthony Neoh, a former government adviser who helped the country open up to foreign money managers, said last year, citing data from Integrity International. Those funds fueled property bubbles in cities such as Hong Kong instead of being invested in domestic assets, he said.

“We know the demand to move abroad is there,” said ANZ’s Zhou. “Even if you impose various restrictions, the money will find its way out of the country, via underground banks and other means.”

Bloomberg

Henry Sapiecha

CHINESE TOLD BY WORLDS BIGGEST BANK TO INVEST IN AUSTRALIA

THE CEO of China’s largest bank has called for more direct investment from his country into the resource-rich regions of the world – primarily Australia, Africa and Latin America – in order to avoid the ”resource bottlenecks” that are hurting China’s economy.

As the breakneck speed of China’s economic boom starts to slow – this week major players in the country’s steel industry revealed they are struggling to make a profit – Jian Jianqing, chief executive of Industrial and Commercial Bank of China, has called for increased foreign investment to secure vital natural resources.

Mr Jian also said China should follow the lead of Japan in the 1980s and manufacture overseas to avoid political backlash and potential trade barriers from developed nations. He cited the Japanese car industry, which has built factories around the world.

”The government should use preferential policy to encourage companies to invest in resources-rich regions. Intensifying the investment in natural resources could help China to overcome resources bottleneck during the period of its rapid industrialisation,” Mr Jian wrote in an article for Caijing magazine.

Mr Jian argued that more Chinese investment abroad could address the country’s over-reliance on exports and domestic investment in construction.

Mr Jian also urged better management of the Chinese investment projects abroad through enhanced legal and policy frameworks.

”The government should provide better support to privately-owned firms’ investing,” he said.

”The state-owned enterprises should be held accountable for their investment decisions from the perspective of shareholders.”

Laurie Pearcey, the CEO of Australia China Business Council, said Beijing had tightened up its outbound investment process and companies had been asked to undertake more due diligence before committing themselves to projects in Australia & abroad generally.

”National Development and Reform Commission [the key ministry responsible for overseas investment] is applying a much more robust due diligence test when it comes to approving Chinese investment offshore. Chinese businesses need to demonstrate the commercial feasibility of the project and good cost management,” said Mr Pearcey.

Australia is now the single largest destination for direct Chinese investment. The Foreign Investment Review Board had approved more than $60 billion worth of Chinese investment projects under the current Labor government and mostly in natural resources as of late last year.

A total of $US34 billion was invested here between January 2005 and December 2010, according to Heritage Foundation, an American think tank. The Economist intelligence unit also ranked Australia as the largest Chinese foreign direct investment destination outside of Asia.

That rate of investment has slowed, in the aftermath of a string of bad Chinese investments in Australia.

The head of Sinosteel, Huang Tianwen, a major Chinese state-owned enterprise and an investor in Australia, reportedly lost his job due to investments that had gone belly-up in WA.

ICBC, considered the world’s biggest bank, has more than 16,000 branches in China, with 260 million personal customers. Its rapid expansion in Australia has seen assets increase from $630 million in 2009 to $3.5 billion this year.

Sourced & published by Henry Sapiecha

CHINESE TOLD BY WORLDS BIGGEST BANK TO INVEST IN AUSTRALIA

THE CEO of China’s largest bank has called for more direct investment from his country into the resource-rich regions of the world – primarily Australia, Africa and Latin America – in order to avoid the ”resource bottlenecks” that are hurting China’s economy.

As the breakneck speed of China’s economic boom starts to slow – this week major players in the country’s steel industry revealed they are struggling to make a profit – Jian Jianqing, chief executive of Industrial and Commercial Bank of China, has called for increased foreign investment to secure vital natural resources.

Mr Jian also said China should follow the lead of Japan in the 1980s and manufacture overseas to avoid political backlash and potential trade barriers from developed nations. He cited the Japanese car industry, which has built factories around the world.

”The government should use preferential policy to encourage companies to invest in resources-rich regions. Intensifying the investment in natural resources could help China to overcome resources bottleneck during the period of its rapid industrialisation,” Mr Jian wrote in an article for Caijing magazine.

Mr Jian argued that more Chinese investment abroad could address the country’s over-reliance on exports and domestic investment in construction.

Mr Jian also urged better management of the Chinese investment projects abroad through enhanced legal and policy frameworks.

”The government should provide better support to privately-owned firms’ investing,” he said.

”The state-owned enterprises should be held accountable for their investment decisions from the perspective of shareholders.”

Laurie Pearcey, the CEO of Australia China Business Council, said Beijing had tightened up its outbound investment process and companies had been asked to undertake more due diligence before committing themselves to projects in Australia & abroad generally.

”National Development and Reform Commission [the key ministry responsible for overseas investment] is applying a much more robust due diligence test when it comes to approving Chinese investment offshore. Chinese businesses need to demonstrate the commercial feasibility of the project and good cost management,” said Mr Pearcey.

Australia is now the single largest destination for direct Chinese investment. The Foreign Investment Review Board had approved more than $60 billion worth of Chinese investment projects under the current Labor government and mostly in natural resources as of late last year.

A total of $US34 billion was invested here between January 2005 and December 2010, according to Heritage Foundation, an American think tank. The Economist intelligence unit also ranked Australia as the largest Chinese foreign direct investment destination outside of Asia.

That rate of investment has slowed, in the aftermath of a string of bad Chinese investments in Australia.

The head of Sinosteel, Huang Tianwen, a major Chinese state-owned enterprise and an investor in Australia, reportedly lost his job due to investments that had gone belly-up in WA.

ICBC, considered the world’s biggest bank, has more than 16,000 branches in China, with 260 million personal customers. Its rapid expansion in Australia has seen assets increase from $630 million in 2009 to $3.5 billion this year.

Sourced & published by Henry Sapiecha

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  • Gold diggers: Aussies strike it rich in Silicon Valley

Technology entrepreneurship in Australia is booming and several Australian companies have received millions in investments in the past week.

It comes as big US venture capital firms have pumped hundreds of millions of dollars into Australian technology companies over the past year or so. Several have recently visited Australia eyeing new prospects.

"Tech is booming right now" ... Freelancer.com CEO Matt Barrie.“Tech is booming right now” … Freelancer.com CEO Matt Barrie.

Today crowd-sourced graphic design website DesignCrowd, based in Sydney, announced it had received a $3 million investment from Melbourne venture capital firm Starfish Ventures.

Its founder, Alec Lynch, 27, started the company with $10,000 in capital – which quickly grew to $60,000 after he tapped three credit cards and his family for loans – on his parent’s kitchen table.

Also today, professional domain name trader Winged Media, based in Australia but now with an office in the US, announced a $3 million investment from the Carnegie Innovation Fund.

"Companies can be based in Australia while winning their first customers all around the world" ... Startmate co-founder Niki Scevak“Companies can be based in Australia while winning their first customers all around the world” … Startmate co-founder Niki Scevak Photo: Billy D. Aldea-Martinez

Last week, Perth-based smartphone app maker Filter Squad, creator of the Discovr range of iOS apps that make it easier to find new apps, announced it had received $1.1 million in funding from Perth firm Yuuwa Capital.

Moving your base to Silicon Valley is no longer essential for technology startup success. Other Australian technology companies that have received huge funding of late include BigCommerce ($15 million in August), 99designs ($35 million in April), OzForex ($110 million in November last year) and Atlassian ($US60 million in July last year).

Earlier this year Australian mobile social media startup Roamz secured $3.5 million from several investors including Salmat.

David McKinney and a screenshot of the Discovr app, which has taken the world by storm.David McKinney and a screenshot of the Discovr app, which has taken the world by storm.

“Tech is booming right now and certainly I’m seeing a resurgence in technology entrepreneurship in Australia,” said Sydney-based Freelancer.com CEO Matt Barrie, adding there had never been a better time to turn the spark of an idea into an exciting new company.

He said entrepreneurs in Australia were finding new ways to shake up stagnating industries and nothing was off limits. It was now possible to start a company off a credit card and showcase your products to the world.

“Big US investors are starting to look outside their own borders more than ever before, and they’re regularly visiting Australia,” said Barrie, who was BRW’s Entrepreneur of the Year for 2011 and has been selected as a featured speaker at the big SXSW 2012 event in Texas.

“Because valuations in the US are quite high right now, US investors are looking abroad, and that’s great for Australia because we’re high on the list.”

Accel is one big US venture capital firm that has made significant investments in Australia. It was the source of the investments in Atlassian, OzForex and 99designs.

Another big US VC firm, Sequoia, had “actively been visiting” Australia, Barrie said.

“Certainly this year I received about 60 or so cold calls from the late stage [investor] guys who, when I say we’re not raising money right now, rattle off a list of their favourite ten Australian tech companies wanting an opinion,” Barrie said.

Barrie runs a Technology Venture Creation class at the University of Sydney and they held their “2011 pitch day” last Friday, with eight teams pitching their startup ideas to a panel of real investors and entrepreneurs.

He said the ideas included Groupon 2.0, online multiplayer game hosting platforms, car pooling platforms, educational games and location-based games.

Barrie said one startup he was advising just got an interview with YCombinator, the “Harvard of startup incubators in the US”, while another got into StartupChile. Two other groups of entrepreneurs had also come to him with term sheets from early stage US investors.

In Australia, those with startup ideas are being encouraged to apply to the local incubator, Startmate, which is accepting applications up until November 30.

Startmate, which helped launch five companies last year, is a mentor-driven seed fund that invests $25,000 in the companies it selects and pays for their legal bills, travel to the US and office space.

“The rise of web and mobile startups with low-priced monthly subscriptions or in-app purchases mean that companies can be based in Australia while winning their first customers all around the world because they don’t need to hire expensive sales people and setup overseas offices,” said Startmate co-founder Niki Scevak.

“The world’s top venture capital firms and investors are increasingly comfortable investing in growth rounds of Australian companies and we are also starting to see that interest move downstream to earlier and earlier stages.

“Dave McClure, of 500 Startups, for instance, invested in three of the five Startmate companies in the last batch.”

Australian entrepreneurs are using the investment dollars to create significant, viable companies that are often acquired by bigger fish.

Australian iOS game developer Firemint sold to Electronic Arts in May for an estimated $20-40 million. Tapulous, founded by an Australian, sold to Disney in July last year, while RetailMeNot was acquired by US company WhaleShark Media for $90 million in December.

Furthermore, the technology kings dominated the recent BRW Young Rich List, while a quarter of the BRW Fast 100 list of fastest growing Australian companies are technology-related.

David McKinney of Discovr said he was proud to be able to run his startup from Australia and would use the $1.1 million investment to expand his team and grow faster.

“We’ve seen an incredible startup culture emerge in the local scene that has been fostered by people like Pollenizer, Atlassiaan, the Startmate progam, and local angel and VC community,” he said.

Lynch, who studied programming and IT at UTS in Sydney and won the university medal, started DesignCrowd in 2008.

Before that he had started another company, which failed, and was working in strategy consulting for Booz and co.

“I took a leave of absence for a year and took $10,000 in capital, moved back home, setup at the family kitchen room table – didn’t have a garage suitable – and launched the business from home,” he said.

He got the idea for a crowd-sourced graphics design service after he saw the London Olympics logo, which was released several years ago after months of development and hundreds of thousands of dollars in fees to a professional design firm. The logo was panned by the public and the media.

“The traditional design process is expensive, slow and very risky,” said Lynch.

In late 2009 DesignCrowd received $300,000 from angel investors and spread that money thin over two years, during which the business grew by around 1300 per cent.

One of the angel investors was Todd Forest, the boss of NineMSN. But Lynch remains the single biggest shareholder, even after the venture capital injection from Starfish.

“The market that we’re operating in is the global graphic design market – it’s a $180 billion market and there’s over 120 million small businesses in the world,” said Lynch.

“To get our service in front of those small businesses and to get a slice of that global market, we need capital.”

Lynch said 60 per cent of his clients were new businesses looking for a logo but now he is trying to target businesses that are in later stages of their life cycle and also offer them related services beyond just graphic design.

According to market research firm IBISWorld, there are 11,000 designers employed at design agencies around Australia. Lynch said that on DesignCrowd there were 40,000 freelance designers and clients typically received over 100 different designs, allowing them to pick the best one.

Lynch said he was now in an aggressive expansion phase and was urgently seeking to hire 10 staff to aid his moves into the US and Britain.

Sourced & published by Henry Sapiecha

The rich rewards of a rare gem

April 18, 2011 – 4:17PM


A rare 24.78 carat Fancy Intense Pink diamond that was auctioned last year. Photo: AFP Photo

Although a 10-carat purplish-pink diamond failed to meet its reserve price at an auction last week, experts say the market for the rare gems is still strong.

“Pink diamonds are red hot,” said David Young, president of Wexford Capital Management, a broker of fancy coloured diamonds.

Christie’s had expected the 10.09 carat Fancy Vivid purplish-pink diamond to fetch as much as $US15 million at a recent auction. Four other pink diamonds had sold for more than $US1 million per carat at auction in the past 15 months.

The record for a diamond sold at auction is held by a Vivid Pink five-carat diamond at $US2.1 million per carat in 2009.

Although Christie’s did not explain why the gem missed its reserve, gemologists and dealers say once you reach the realms of $US1 million-plus per carat, buyers becomes particularly scrupulous.

“When you get up to this level of stone – these Rembrandts, these Monets, these one-of-a-kind pieces- they have to be held up to a very high standard if someone’s going to put that much money on the table,” said Stephen Hofer, a New York research gemologist and diamond cutter specialising in coloured diamonds.

Experts agree that prices for coloured diamonds, pinks in particular, are on the rise, noting that a barrier was broken in recent years that thrust pinks previously selling for $US500,000 to $US600,000 a carat into the $US1 million-a-carat realm.

While the 10-plus carat pinks stun with their size, diamonds extracted from the Argyle diamond mine in Western Australia command similar sums with the intensity of their colour.

Global miner Rio Tinto’s Argyle mine is the world’s only consistent supplier of pink diamonds. While smaller, experts said the rare and exquisite Argyle gems are in a class all their own.

At Argyle, pink diamonds making it to the annual tender are literally one in a million. For every one million carats of rough diamonds produced from the mine, only one polished carat is offered for sale in the tender. In terms of global diamond production, pinks make up only 0.03 percent.

Each spring Rio Tinto displays its finest 40-55 diamonds weighing 0.50 carat or more and ranging in colour from light pink to red, and even violet, at private viewings in exclusive hotels in cities like New York, Paris, and Hong Kong.

The location of the private viewings is kept secret until the day they are shown. Once these rare stones have made their way around the world, sealed bids from diamond connoisseurs and collectors are tallied and the winners notified.

Last November London jewellery dealer Laurence Graff paid $US46 million for a 24.78-carat pink diamond at a sale in Geneva, the highest total price for a gem at auction. He renamed it the “Graff Pink.”

“The thing about the Graff diamond is that it’s a piece of art. There is not another one like that anywhere,” said Gary Roskin, gemologist and founder of The Roskin Gem News Report.

MORE …CLICK ON PHOTO ABOVE

Reuters


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Received & published by Henry Sapiecha

Cadadas pension funds splurge

$12bn on real estate in Australia

CANADA’S biggest pension fund has made investments worth about $6.7 billion in Australia in the past 1.5years.

The $137bn Canadian Pension Plan Investment Board is also committed to investing another $900 million with Goodman Group, including $595m for its share in the proposed takeover of the ING Industrial Fund (IIF) in a Goodman-led consortium.

It is the largest investor in Australia among global pensions, which have collectively put more than $12bn in Australian companies or assets in recent months.

Commenting on the IIF deal, Graeme Eadie, CPPIB senior vice-president, real estate investment, said the transaction was an opportunity to invest in a high-quality industrial property portfolio.

“It represents our largest real estate investment in Australia,” Mr Eadie said.

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This deal came within four weeks of CPPIB buying a 25 per cent stake in Westfield Stratford City for $700m. This is its second investment with the Australian shopping centre giant Westfield Group.

Its largest deal in Australia to date is toll road company Intoll, which it took over and delisted last month after shareholders approved its $3.5bn offer.

Intoll, the former Macquarie Infrastructure Group, was the second former Macquarie vehicle that CPPIB had acquired.

Its first acquisition was the former Macquarie Communications Infrastructure Group, for which it paid $2.2bn.

CPPIB, based in Toronto, is a professional investment management organisation that invests the funds not needed to pay current benefits. It has also invested with groups such as Dexus Property Group and Macquarie Global Property Advisers, a private equity group, and Colonial First State Global Asset Management.

It is thought to be close to acquiring an office tower in Lend Lease’s Barangaroo project, on Sydney’s waterfront.

CPPIB regularly co-invests with The Netherlands’ APG (Algemene Pensioen Groep, or “all pensions group”) such as in the Goodman consortium in which APG has a 25.2 per cent stake.

APG is also a 25 per cent owner of Westfield Stratford City in Britain and also has a third interest in the Westfield UK Shopping Centre Fund. One of APG’s first investments in Australia is a 40 per cent stake in a Valad fund, which owns Goldfields House, in addition to also owning an undisclosed stake in the unlisted Valad Core Plus Fund.

APG also has an investment in an unlisted GPT fund.

While APG declines to comment on specific investments, its head of strategic real estate in Asia, Daan van Aert, said Australia was an attractive area for real estate primarily due to the stable economic growth, strong regulatory framework and because it is a transparent market. “We are at our target exposure for Australia,” Mr van Aert said. “As such, we are currently more focused on asset management and recapitalisations of our existing portfolio.”

He said APG’s strategy was to set up local partnerships with the strongest real estate managers in the world, such as Westfield and Goodman Group from Australia.

Another Dutch pension fund, PGGM, last month invested $262m in the new Lend Lease Social Infrastructure Fund in Britain. PGGM holds $1bn in Westfield notes, secured on six shopping centres.

Global pension funds including those from Malaysia, Korea, Canada and Sweden have recently stepped up investment as they seek out countries with solid economic growth to invest in search of a stable future income stream.

While some chose to partner with the likes of Goodman Group, Colonial First State Global Asset Management, Westfield, Lend Lease or GPT Group, others opt for direct investment.

Korea’s National Pension Scheme, Malaysia’s Permodolan Nasional, Switzerland’s Swiss pension group AFIAA and Germany’s Deka Immobilien have all bought Australian office blocks.

Additionally, an unknown number of pension funds invest through global fund managers, like the Chicago-based LaSalle Investment Management; the Hong Kong-based CLSA Capital Partners; CBRE Investors; or Sweden’s SEB Asset Management.

As members’ contributions pile up around the world — just as in Australia — international property consultant DTZ recently estimated that $US281bn of new capital would be available for investments this year, up 22 per cent from a year ago.

China, Australia and India would attract about 15 per cent of that capital, said a recent DTZ report.

Jonathan Thompson, KPMG’s head of global real estate, who was in Sydney recently, said more pension funds would start to put their money in real estate. For instance, he said Norway changed its laws in March last year to allow the Norwegian Government Pension Fund, which manages $US520bn, to invest in real estate.

Alistair Meadows, regional director of international capital group Jones Lang LaSalle, said the next wave of investment would come from Asian pension funds.

By 2020, he said Asian pension funds were expected to have assets totalling $4.3 trillion.

Since 2009, South Korea’s National Pension Scheme, which invests the pension contributions of about 18 million people, had acquired $3.6bn of prime real estate in London; Tokyo, Berlin and Sydney, he said.

In Australia, NPS bought Aurora Place, a blue-chip CBD tower, for $635m.

On his recent visit to Seoul, Mr Meadows met several second-tier Korean pension funds — the equivalent to industry funds in Australia — that were keen to follow NPS’s footsteps overseas.

“We believe that most pension funds are underweight to real estate, especially in Japan and Korea,” Mr Meadows said.

“In 2011, we expect to see them in Australia looking for direct acquisitions; co-investment with an Australian partner or indirectly through unlisted Australian property funds.”

While the established pension funds will have between 5 per cent and 10 per cent of their investment in property, Mr Meadows said most Asian pension funds had no allocation or less than 5 per cent of their assets in property.

DTZ associate director Aurelo Dinapoli said pension funds were keen to deploy their capital in key Australian cities — Sydney and Melbourne.

“We represented Chinese pension funds looking for Australian assets,” Mr Dinapoli said.

“Money is not an issue for this group. They have  lots of money to invest.”

He said that typically a pension fund looked to invest between $200m and $300m on its first investment in Australia.

Rick Butler, senior managing director of CB Richard Ellis, has facilitated several sales, including most recently the $113m purchase of 737 Bourke Street by Malaysian pension group KWAP.

Mr Butler said these buyers were interested in direct assets or in “club” deals with small numbers of like-minded investors.

Some consultants believe that the high Australian dollar may reduce the flow into Australia.

APG’s Mr van Aert said: “The general policy is hedging currency exposures, and as such the hedging cost is factored into our investment returns and decisions.”

Sourced & published by Henry Sapiecha

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