WORLD PROPERTY CHANNEL ®

LaSalle Investment Management, the fund arm of commercial real estate broker Jones Lang LaSalle Inc., sees a money-making opportunity in Asia right now.

The Chicago-based firm's LaSalle Asia Opportunity Fund III plans to acquire a mix of assets valued at more than $4 billion by mid-2011.

The fund will use $2.1 billion of capital remaining at the beginning of this year by mid-2011, Andrew Heithersay, a Hong Kong-based LaSalle international director, told DSNews.com.

It may borrow up to 55 cents for every dollar invested, taking total new acquisitions to more than $4 billion, he says.

Andrew Heithersay

International funds like LaSalle are buying assets in Asia for the first time since late 2008 as property values have recovered after the financial crisis, according to DSNews.com.

LaSalle relocated its global CEO Jeff Jacobson to Singapore from London in January, reflecting the region's growing importance.

"There are some interesting opportunities because property markets in Asia-Pacific are generally in recovery, yet pockets of stressed capital remain," Heithersay said.

LaSalle Asia Opportunity Fund III has committed to five acquisitions worth a combined $800 million so far this year.

The fund sees opportunities in providing "rescue capital" to over-leveraged projects and working with lending banks to inject fresh equity funding to those in financial distress, Heithersay said.

Hotel Ibis Singapore

It invested $225 million in a large warehouse and a portfolio of office buildings in Tokyo in the first quarter.

In Singapore, some funds and other investors who bought properties at the peak of the market will have to refinance debt in the next 12 to 18 months and need fresh equity, Heithersay said. Otherwise, they will have to sell assets.

LaSalle also will focus on providing risk capital in markets where domestic real estate investment trusts and property funds have been weakened by the financial crisis and are reluctant to take development risks in new projects.

The fund made investments for the first time in Australia, where its higher cost of capital had previously rendered it uncompetitive with domestic rivals, DSNews.com reports.

Local REITs and property developers were preoccupied with capital raising and loan restructuring to improve their balance sheets last year and unwilling to fund new developments, Heithersay said.

Australia

The fund in April took a 25 percent stake in a venture with Grocon Pty and GPT Wholesale Office Fund to build a 58,000- square-meter (624,307-square-foot) premium-grade office building which will house the Sydney head office of Australia & New Zealand Banking Corp.

The fund has targeted Sydney's hotel market, betting Australia's economic growth and limited supply of rooms for the foreseeable future will drive up values, Heithersay said.

The city's five-star hotels are running at above 90 percent occupancy, LaSalle said in a May statement. Yet existing hotels are valued 40 percent lower than replacement costs, making new projects unfeasible and sustaining room-rate growth, he said.

The fund on May 23 said it agreed to buy the 436-room, five-star Sofitel Wentworth Sydney, in the heart of the city's central business district, for A$130 million ($109 million) from Tourism Assets Holdings Ltd.

Singapore

LaSalle likes budget hotels in Singapore, where the supply of rooms is unable to match higher demand driven by visitors from China, India and Indonesia, Heithersay said.

The fund developed the 538-room Hotel Ibis Singapore on Bencoolen, which opened in March 2009 and is operating at more than 90 percent occupancy, he said.
 
China

In China, LaSalle is seeking partnerships, expecting high- quality developers will face increasing financial pressure from the government's austerity measures.

Sheraton Shanghai Hongqiao Hotel

"LaSalle's investment strategy is built around the burgeoning middle class, increased urbanization and movement of consumer goods within those cities," Heithersay said.

"That translates to real estate investment opportunities in mid-market residential and retail malls as well as logistics warehouses in selected medium-sized Chinese cities. These sectors are well insulated from potential property bubbles."

LaSalle has invested $850 million in Greater China, including logistics warehouses, a stake in a local residential developer, an office project in Chengdu and the Sheraton Shanghai Hongqiao Hotel.

LaSalle Asia Opportunity Fund III aims for total returns in the high teens by making on average five-year investments, mostly through equity stakes directly in properties or via preferred securities or mezzanine debt, Heithersay said.

LaSalle oversaw $38.3 billion in seven Asia-Pacific funds at the end of March, $6.2 billion, he said.  

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