Thursday October 9, 2008

Pacific Star taps Mideast for US$1b

SINGAPORE: Pacific Star, a Singapore-based property investment manager, said it hopes to raise over US$1bil from Middle Eastern sovereign funds for investments into Asia despite falling real estate prices.

“Middle East investors were focused on Europe and the United States in the past, but Asia is increasingly on their menu,” said Knut Riesmeier, the newly appointed president of Pacific Star’s Qatar office, its first in the Middle East.

“Our strategy has always been to focus on prime properties which have been much less affected by the financial turmoil,” said Riesmeier, who joined the Singapore firm on Oct 1.

Pacific Star said its preferred Asian markets were Vietnam, Japan and South Korea.

Asia’s property markets are expected to be hit by the ongoing financial turmoil which has roiled property values in the United States and Europe, but Riesmeier said Pacific Star’s investments had been resilient.

He said Pacific Star would also offer syariah-compliant funds, continuing a trend of Asia’s property firms such as City Developments and Cambridge Industrial Trust seeking Islamic financing amid the credit crunch.

Pacific Star currently operates five funds with about US$4bil in assets and plans to raise this to US$10bil by 2011, according to Riesmeier. A significant part of the growth would come from oil-rich Middle East states such Qatar, Dubai and Abu Dhabi, he said.

“We’ve had long-term relationships with Qatar and had teamed up with the Qatar Investment Authority to develop a project in Kuala Lumpur,” said Riesmeier, who declined to name the other wealth funds that Pacific Star had approached.

Riesmeier, who was previously global head of real estate at MEAG, part of German reinsurer Munich Re , said he was also seeking to draw investors into Middle East real estate, even as most were now sticking to the sidelines due to the market fear.

“Investors are keeping cash because a lot of them are really afraid and want to be on the safe side. But there are also investors holding a lot of cash, for example the German open-ended funds,” he said. - Reuters

Property markets in the Middle East were expected to outperform those in other regions for up to two years, property consultancy Jones Lang LaSalle said on Tuesday, citing the outcome of an investor sentiment survey.

Riesmeier sees growth of 25% for property values in Abu Dhabi and low double-digits percentage increases for other Middle Eastern markets over the next two years, amid concerns of an overheated market in Dubai.

“The bubble in Dubai mainly refers to residential as there’s strong supply coming on and with the global situation, there are concerns of over-building,” he said.

“There is strong population growth in the Middle East so everything is needed - shopping malls, offices, residential. What we expect is, besides Dubai, there is still a bit of undersupply right now.” - Reuters

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