Goldman Sachs has amassed $2bn to use for property investments in Asia, a move likely to intensify competition for assets in fast-growing markets such as China and India.
The bank has been a prominent investor in Japanese property for a decade, but has decided to allocate significant resources to real estate opportunities across the region.
Rival investment banks – Morgan Stanley in particular – have recently stepped up such investments in Asia outside Japan and raised record funds to target fast-growing markets.
Goldman plans to invest across Asia’s real estate asset classes, including direct purchases of buildings, in development opportunities and by taking equity stakes in listed property companies. If invested, the $2bn would – by some measures – triple the bank’s equity committed to Asia.
The capital, which excludes leverage, will be supplied from the bank’s balance sheet and from real estate private equity funds managed by Goldman.
Goldman’s Developing Markets Real Estate fund closed in October, raising $2.1bn – about two-thirds of which is expected to be spent in Asia. The bank will also fund investments through its Whitehall real estate vehicle.
Goldman is assigning four managing directors to India and China, to be based in Hong Kong, Singapore and Mumbai, as part of its expansion in the sector.
Competition for real estate assets in Asia is extreme and has pushed up valuations, leading some analysts to warn of imminent price corrections in countries such as India. Hedge funds have also poured in to Asia, investing in real estate companies before?they?join the stock market.
However, Jean De Pourtales, Goldman’s real estate global head of developing markets, said: “The [high] valuations in real estate markets are a worldwide issue. The attraction of a country such as India is that it still has tremendous long-term growth prospects.”
He added that China and south-east Asia would also be a focus for his team.
Investment banks are also seeking staff to service demand from Asian clients in the property sector for advice on raising capital and mergers and acquisitions. Goldman last year poached a team of real estate investment bankers from UBS Asia.
Goldman has many properties in Japan, including more than 100 golf courses and several resort hotels. Recently, it paid Y38bn ($340m) for the Tiffany building in Tokyo’s Ginza, making it the most expensive piece of real estate in Japan.
