LYNN WANG THE FRANK J FABOZZI SERIES Praise for Jacket Image: © iStockphoto “An indispensible tool for executing successful international real estate investment strategies with a focus on the biggest and fastest growing emerging markets This is the only book of its kind A must-have for serious investors.” —STEPHEN M RENNA President of the National Association of Real Estate Investment Managers “David Lynn and Tim Wang combine their extensive industry experience in real estate research and strategy into an insider’s look at how the professionals think about and act on international real estate opportunities Reading this book is like having a preferred seat on the investment committee at a major international real estate investment firm.” —DR DAVID FUNK Director of the Cornell University Program in Real Estate “For anyone considering investing or working in real estate in China, India, or Brazil, this is the definitive starting point David Lynn and Tim Wang provide a timely and thorough introduction to each country’s economy and nascent real estate markets.” —DR PETER LINNEMAN Principal of Linneman Associates and the Albert Sussman Professor of Real Estate, The Wharton School “A compelling argument for investing in real estate opportunities in China, India, and Brazil This is the most comprehensive discussion of topics and investment strategies that real estate investors must consider when evaluating emerging markets.” —ROBERT M WHITE, JR., CRE Founder and President of Real Capital Analytics Inc “The best guide there is to real estate markets in the high economic growth countries of Brazil, India, and China If you are a private equity investor contemplating emerging market real estate, read this book.” —JAMES FETGATTER Chief Executive Officer, Association of Foreign Investors in Real Estate (AFIRE) EMERGING MARKET REAL ESTATE INVESTMENT TIM WANG, PHD, is Senior Vice-President and Senior Investment Strategist with the Research and Investment Strategy Group at ING Clarion Partners Dr Wang joined ING Clarion Partners in 2006 and has authored more than fifty internal and external real estate investment strategy and market research articles and book chapters He is a frequent speaker at industrial conferences Tim holds an MBA from New York University and a PhD from the University of Georgia EMERGING MARKET REAL ESTATE INVESTMENT Investing in China, India, and Brazil DAVID J LYNN, PHD, is an institutional real estate investor, strategist, and portfolio manager with extensive experience in national and international markets Currently, he is Managing Director, Head of the Research and Investment Strategy Group, and Generalist Portfolio Manager at ING Clarion Partners In this capacity, he directs the firm’s strategic and tactical investment decisions regarding investment portfolios He is also a member of the Investment and Operating Committees, where he makes decisions on billions of dollars of new investments, portfolios, fund strategies, and dispositions Lynn’s theoretical work has yielded new approaches and analytical techniques in the areas of active portfolio management, market forecasting, financial distress, and emerging markets He has published widely on the subjects of real estate investment, development, economics, and land use Lynn has written or coauthored over seventy articles, internal investment and strategy papers, and three major books, including Active Private Equity Real Estate Strategy He writes a highly regarded column called “Capital Trends” in National Real Estate Investor magazine and is frequently cited in the media for his views on the economy and the real estate industry Lynn earned his PhD in financial economics from the London School of Economics, where he also earned a master of science specializing in finance He holds an MBA from MIT’s Sloan School of Management $60.00 USA/$72.00 CAN I n recent years, China, India, and Brazil have received much attention, and rightfully so They are among the biggest and fastest-growing economies, encompassing a significant percentage of the world’s land coverage, 30 percent of the world’s population, and amounting to a combined gross domestic product (GDP) of more than twelve trillion dollars While there are ample real estate investment opportunities available in these and other emerging markets, understanding the dynamics of this important asset class is essential if you intend on making prudent investments Focusing primarily on private equity real estate investment in China, India, and Brazil, this reliable resource details an approach to commercial real estate investment in emerging markets and illustrates several strategies and analytical methods crucial to successful investment Filled with in-depth insights and expert advice, Emerging Market Real Estate Investment focuses on investment themes and strategies as well as the economic, legal, and institutional environment of each country EMERGING MARKET REAL ESTATE INVESTMENT Investing in China, India, and Brazil DAVID J LYNN, PHD with TIM WANG, PHD 1807c Opening with two informative chapters that provide an overview of the fundamentals of commercial and international real estate investment, this practical guide also includes in-depth country-specific chapters on China, India, and Brazil These chapters contain: • An examination of the economic, institutional, and political environment of each country • A discussion of the main features of each real estate market, including real estate foreign direct investment (FDI) • A review of the major real estate markets and submarkets in each country • An analysis of the four or five primary real estate sectors in each country: office, retail, residential, industrial, and hotel where applicable • A discussion of real estate investment options and strategies Whether you’re an institutional or private investor, the ability to achieve higher returns and portfolio diversification—while accessing a larger investment universe—is essential Emerging Market Real Estate Investment will show you what it really takes to make this happen and put you in a better position to excel when investing in real estate abroad P1: TIX/b appb P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 12:28 216 Printer: Courier/Westford P1: TIX/OSW P2: c fm JWBT340-Lynn August 18, 2010 22:2 Printer: Courier/Westford Additional Praise for Emerging Market Real Estate Investment “David Lynn and Tim Wang have produced a real winner Emerging markets real estate is an essential subject for any investor because of its high returns, its contribution to diversification in a global portfolio, and its role as an inflation hedge This book focuses on the three most important emerging market real estate arenas: Brazil, China, and India Their long experience in real estate markets and the hundreds of interviews he has conducted gives book unique insights into investing in these markets as well as emerging markets real estate generally His analysis of property investment approaches and styles is excellent, and his paradigm of location, competition, and growth provides an appropriate framework for the book The sections on the practical aspects of investing in emerging market real estate provide the reader with a detailed guide through the complex risk, regulatory, legal, and competitive characteristics of each country This is a notable and unique contribution to emerging markets investing knowledge.” —Dr Mark Mobius Executive Chairman and Portfolio Manager Franklin Templeton Investments “David and Tim have written the ‘must read’ book for all real estate investors interested in Brazil, China and India He comprehensively covers the landscape of issues—economic, policy, legal, market, sector, entry, exit, and strategy Of noted value is their sanguine assessment of the risks and opportunities of alternative strategies in each country The first outlay for all should be David and Tim’s book.” —Dr Raymond Torto Chief Economist of CB Richard Ellis and the Co-Founder of Torto-Wheaton Research “Emerging Market Real Estate Investment is a powerful tool for those engaged in foreign investment generally, as well as in China, India and Brazil in particular It combines a broad general view of competitive strategy with local detail on costs and legal aspects The book is an intelligent and practical guide to foreign real estate investment.” —Bowen H McCoy, CRE former Partner and Managing Director, Morgan Stanley “This book does for international real estate what Paul Samuelson’s Economics did for economics students—it finally provides a new discipline with its first Bible Rich in content and filled with practical insights, this book couldn’t have come at a better time in the market cycle.” —Kenneth A Munkacy Senior Managing Director, GID International Group/GID Investment Advisers, LLC i P1: TIX/OSW P2: c fm JWBT340-Lynn August 18, 2010 22:2 Printer: Courier/Westford The Frank J Fabozzi Series Fixed Income Securities, Second Edition by Frank J Fabozzi Focus on Value: A Corporate and Investor Guide to Wealth Creation by James L Grant and James A Abate Handbook of Global Fixed Income Calculations by Dragomir Krgin Managing a Corporate Bond Portfolio by Leland E Crabbe and Frank J Fabozzi Real Options and Option-Embedded Securities by William T Moore Capital Budgeting: Theory and Practice by Pamela P Peterson and Frank J Fabozzi The Exchange-Traded Funds Manual by Gary L Gastineau Professional Perspectives on Fixed Income Portfolio Management, Volume edited by Frank J Fabozzi Investing in Emerging Fixed Income Markets edited by Frank J Fabozzi and Efstathia Pilarinu Handbook of Alternative Assets by Mark J P Anson The Global Money Markets by Frank J Fabozzi, Steven V Mann, and Moorad Choudhry The Handbook of Financial Instruments edited by Frank J Fabozzi Interest Rate, Term Structure, and Valuation Modeling edited by Frank J Fabozzi Investment Performance Measurement by Bruce J Feibel The Handbook of Equity Style Management edited by T Daniel Coggin and Frank J Fabozzi The Theory and Practice of Investment Management edited by Frank J Fabozzi and Harry M Markowitz Foundations of Economic Value Added, Second Edition by James L Grant Financial Management and Analysis, Second Edition by Frank J Fabozzi and Pamela P Peterson Measuring and Controlling Interest Rate and Credit Risk, Second Edition by Frank J Fabozzi, Steven V Mann, and Moorad Choudhry Professional Perspectives on Fixed Income Portfolio Management, Volume edited by Frank J Fabozzi The Handbook of European Fixed Income Securities edited by Frank J Fabozzi and Moorad Choudhry The Handbook of European Structured Financial Products edited by Frank J Fabozzi and Moorad Choudhry The Mathematics of Financial Modeling and Investment Management by Sergio M Focardi and Frank J Fabozzi Short Selling: Strategies, Risks, and Rewards edited by Frank J Fabozzi The Real Estate Investment Handbook by G Timothy Haight and Daniel Singer Market Neutral Strategies edited by Bruce I Jacobs and Kenneth N Levy Securities Finance: Securities Lending and Repurchase Agreements edited by Frank J Fabozzi and Steven V Mann Fat-Tailed and Skewed Asset Return Distributions by Svetlozar T Rachev, Christian Menn, and Frank J Fabozzi Financial Modeling of the Equity Market: From CAPM to Cointegration by Frank J Fabozzi, Sergio M Focardi, and Petter N Kolm Advanced Bond Portfolio Management: Best Practices in Modeling and Strategies edited by Frank J Fabozzi, Lionel Martellini, and Philippe Priaulet Analysis of Financial Statements, Second Edition by Pamela P Peterson and Frank J Fabozzi Collateralized Debt Obligations: Structures and Analysis, Second Edition by Douglas J Lucas, Laurie S Goodman, and Frank J Fabozzi Handbook of Alternative Assets, Second Edition by Mark J P Anson Introduction to Structured Finance by Frank J Fabozzi, Henry A Davis, and Moorad Choudhry Financial Econometrics by Svetlozar T Rachev, Stefan Mittnik, Frank J Fabozzi, Sergio M Focardi, and Teo Jasic Developments in Collateralized Debt Obligations: New Products and Insights by Douglas J Lucas, Laurie S Goodman, Frank J Fabozzi, and Rebecca J Manning Robust Portfolio Optimization and Management by Frank J Fabozzi, Peter N Kolm, Dessislava A Pachamanova, and Sergio M Focardi Advanced Stochastic Models, Risk Assessment, and Portfolio Optimizations by Svetlozar T Rachev, Stogan V Stoyanov, and Frank J Fabozzi How to Select Investment Managers and Evaluate Performance by G Timothy Haight, Stephen O Morrell, and Glenn E Ross Bayesian Methods in Finance by Svetlozar T Rachev, John S J Hsu, Biliana S Bagasheva, and Frank J Fabozzi The Handbook of Municipal Bonds edited by Sylvan G Feldstein and Frank J Fabozzi Subprime Mortgage Credit Derivatives by Laurie S Goodman, Shumin Li, Douglas J Lucas, Thomas A Zimmerman, and Frank J Fabozzi Introduction to Securitization by Frank J Fabozzi and Vinod Kothari Structured Products and Related Credit Derivatives edited by Brian P Lancaster, Glenn M Schultz, and Frank J Fabozzi Handbook of Finance: Volume I: Financial Markets and Instruments edited by Frank J Fabozzi Handbook of Finance: Volume II: Financial Management and Asset Management edited by Frank J Fabozzi Handbook of Finance: Volume III: Valuation, Financial Modeling, and Quantitative Tools edited by Frank J Fabozzi Finance: Capital Markets, Financial Management, and Investment Management by Frank J Fabozzi and Pamela Peterson-Drake Basics of Finance: An Introduction to Financial Markets, Business Finance, and Portfolio Management by Frank J Fabozzi and Pamela Peterson-Drake Simulation and Optimization in Finance: Modeling with MATLAB, Risk, or VBA by Dessislava Pachamanova and Frank J Fabozzi Probability and Statistics for Finance Svetlozar T Rachev, Markus Hoechstoetter, Frank J Fabozzi, Sergio M Focardi Active Private Equity Real Estate Strategy by David Lynn ii P1: TIX/OSW P2: c fm JWBT340-Lynn August 18, 2010 22:2 Printer: Courier/Westford Emerging Market Real Estate Investment Investing in China, India, and Brazil DAVID J LYNN, PH.D with TIM WANG, PH.D John Wiley & Sons, Inc iii P1: TIX/OSW P2: c fm JWBT340-Lynn Copyright C August 18, 2010 22:2 Printer: Courier/Westford 2010 by David J Lynn All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic formats For more information about Wiley products, visit our Web site at www.wiley.com Library of Congress Cataloging-in-Publication Data: Lynn, David J Emerging market real estate investment : investing in China, India, and Brazil / David J Lynn p cm – (Frank J Fabozzi series ; 196) Includes index ISBN 978-0-470-90109-0 (cloth); 978-0-470-91256-0 (ebk); 978-0-470-91257-7 (ebk); 978-0-470-91258-4 (ebk) Real estate investment–China Real estate investment–India Real estate investment–Brazil I Title HD926.L96 2010 332.63’24–dc22 2010026720 Printed in the United States of America 10 iv P1: TIX/OSW P2: c fm JWBT340-Lynn August 18, 2010 22:2 Printer: Courier/Westford Contents Preface Characterizing Emerging Market Real Estate China, India and Brazil Outline of the Book Note vii x x xvi xvi Disclaimer xvii Acknowledgments xix CHAPTER Fundamentals of Real Estate Investment Investing by Property Sector Investing by Style Investing by Phase Asset Allocation Notes CHAPTER Investing in International Real Estate Why Invest in International Real Estate? Risks in International Real Estate Mitigating Country Risks Notes CHAPTER China Introduction Overview of the Market Environment The Real Estate Market Property Sectors Primary Markets Secondary Markets Investment Strategies Notes 10 10 13 13 22 23 26 27 27 29 48 56 66 80 84 98 v P1: TIX/OSW P2: c fm JWBT340-Lynn August 18, 2010 22:2 Printer: Courier/Westford vi CONTENTS CHAPTER India Introduction Overview of the Market Environment The Real Estate Market Property Sectors Primary Markets Secondary Markets Investment Strategies Notes CHAPTER Brazil Introduction Overview of the Market Environment The Real Estate Market Property Sectors Primary Markets Investment Strategies Notes 101 101 102 111 115 128 136 140 152 153 153 153 171 174 200 203 209 APPENDIX A Country Risk 211 APPENDIX B Property Market Practice in China 213 Bibliography 217 About the Authors 219 Index 221 P1: TIX/OSW P2: c fm JWBT340-Lynn August 18, 2010 22:2 Printer: Courier/Westford Preface his book focuses primarily on private equity real estate investment in China, India, and Brazil Much attention has been devoted in recent years to the “BRIC” countries—that is, these three countries plus Russia Several analysts have argued that China, India, and Brazil will be among the world’s largest economies by the year 2050.1 These countries encompass a significant percentage of the world’s land coverage, 30% of the world’s population and amount to a combined GDP (PPP) of US$12.4 trillion They are among the biggest and fastest-growing emerging markets We decided to exclude Russia in this analysis as China, India, and Brazil feature more of the characteristics of typical emerging markets—that is, young, large populations with significant long-term growth and arguably deeper and more diversified economies Russia’s demographic profile (older, shrinking population), its less diversified economy, and issues with endemic corruption led us to omit it from this book An objective of this book is to develop a general approach to commercial real estate investment in emerging markets We believe that a discussion of the three largest emerging markets illustrates some common approaches, strategies, and analytical methods that can be used in emerging market real estate This book is a departure from other studies of international real estate investment in that it focuses on broad investment themes and strategies as well as economic and legal/institutional factors, rather than the minute details of local market analyses An inherent thesis is that real estate is a derivative of the overall economy and institutional framework and one can only understand real estate drivers of demand in this context The analysis and recommendations are designed to be pragmatic, pithy, and actionable We specifically not delve into extensive detail about items such as current capital values and rental rates except for illustrative purposes in certain areas of the text Pricing of this nature is subject to changes in the short term Instead, we focus on the forces that determine pricing and values The primary audience for this book is the foreign commercial real estate investor Nevertheless, domestic investors should find the book of interest as well, as it covers many of the same issues, opportunities, and impediments foreign investors face T vii P1: TIX/OSW P2: c fm JWBT340-Lynn August 18, 2010 22:2 Printer: Courier/Westford viii PREFACE The research for this book was based on a combination of direct data sources, third-party reports, and on-the-ground research The on-the-ground research was essential in developing our pragmatic and strategic approach On-the-ground research consisted of collecting and organizing data and information available only in the local market We also conducted hundreds of in-person and telephone interviews with local, regional, and national real estate investors, developers, brokers, consultants, government officials, architects/planners, economists, and other agents involved in the commercial real estate value creation process We relied upon both top-down and bottom-up research in developing the book We believe this approach is intrinsic and essential in all rigorous real estate analysis (Exhibit P.1) The economic, political, demographic, and institutional macroeconomic forces are of essential importance in commercial real estate, particularly in emerging markets A part of this top-down analysis involves legal, institutional, and regulatory factors that are fundamental in investment structuring and economic returns expectations For example, legal restrictions on commercial real estate investment can render some sectors and strategies virtually off limits to foreign real estate investment The bottom-up analysis includes submarket economics and real estate fundamentals as well as property-specific factors such as capital values, operating income, and other local or property level data Our approach is highly strategic and pragmatic in nature, outlining opportunities for investing in these markets Our analysis is based upon what Economic Political Legal Institutional Property Level Market/Submarket Supply/Demand Cash Flow Top Down Bottom Up EXHIBIT P.1 Top Down and Bottom Up Approaches P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 Index housing deficit, 195 estimated deficit, income group/region, 200e focus, 204, 208–209 projects, infrastructure level, 204 purchase, mortgage loans (impact), 197–198 import real growth rates, 190e income, 167–169 distribution, 169e industrial activity (decentralization), tax incentives (usage), 193–194 industrial confidence, 190 index, 191e industrial market, overview, 189e industrial production, 188 growth, 190, 190e industrial property market, underdevelopment, 188 industrial real estate, municipalities (ranking), 194e industrial sector, 186–194 industrial yields, 190–192 markets/trends, 191e industry potential, 173 inflation, 160–161 infrastructure, 171–172 institutional changes, 162–163 institutional environment, 154–171 interest rates, decline, 198 monetary policy, impact, 194–195 investment opportunities, 207 potential, 200 strategies, 203–210 job market uncertainty, 195 Jupiter, oil site, 159 liquid fuel production, 159e logistics asset, location (assessment), 192 logistics industry, 186–187 Lojas Americanas, impact, 182 map, 155e Printer: Courier/Westford 223 market attractiveness, indices (ranking), 153 market environment, overview, 153–171 mass housing development, for-sale category, 171 median age, 163 middle class, expansion, 167 mortgage loans, GDP percentage, 195 motor vehicle sales, 169 municipalities home sales velocity, 199–200 residential sales velocity, 199e municipios, division, 166 net exporter status, 158–159 office market, overview, 168e, 175e office sector, 174–200 rent growth/capital appreciation, 172 oil accumulation, 158–159 owner-occupied housing, demand, 195 Pao de Acucar, impact, 182 Parati, oil site, 159 personal credit delinquencies, 169, 170e outstanding, volume (expansion), 169 political risk, 162–163 population, 163–167 estimate, 163 profiles, estimates, 164e size, region/state examination, 166e Porto Alegre (second-tier city), 176 ports, ranking, 192e port tonnage, 192 primary market, 201–202 expansion, 173 private consumption, 206 productivity, 174 product lines, breadth, 173 property sectors, 174–200 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 224 Brazil (Continued ) real estate companies, IPOs, 198–199 market, 171–174 market, characterization, 173 stock, problem, 153–154 real GDP, average rate (per annum), 156 Real to USD spot exchange rate, 162e recovery (2009), 187–188 relative capital-city-level shopping center penetration/spend profiles, 188e relative state-level shopping center penetration/speed, 186e residential market, overview, 196e residential sector, 194–200 patterns, 194–195 retail confidence/sales, continuation, 172–173 retail consumer confidence, 180e retail market, overview, 179e retail sales increase, 178 index growth, 180e year-on-year growth, 181e retail sector, 178, 181–186 retrofitted buildings, 172 Rio de Janeiro economy, 166–167 industrial real estate attractiveness, 193 shopping center attractiveness, 184 sale-and-leaseback strategies, 207 sale-leaseback opportunities, 171–172 Sao Paulo domestic market capitalization, expansion, 174–176 economic downturn, 202 economy, 166–167 industrial real estate attractiveness, 193 industrial rent growth, 172 office market, 176 Printer: Courier/Westford INDEX shopping center attractiveness, 184 shopping center supply, 182–183 stock distribution, 201e Stock Exchange, domestic market capitalization expansion, 174–176 secondary market, 203 expansion, 173 second-tier cities, 176–178 SELIC, 162 shopping centers attractiveness, state rankings, 185e construction pipeline, 184 density, mismatch, 184 gross leasable area (GLA), 183e shopping centre drivers, city rankings, 187e short-term real estate pricing, problems, 153 social discontent, risk (reduction), 162–163 socioeconomic segments, attractiveness, 209–210 Sonda Supermercados, impact, 182e sovereign debt, investment-grade status, 160 sovereign long-term debt, upgrade, 154 structural changes, 162–163 supermarket anchors, 181–182 technology, 174 total population, 163e trade, 157–159 surplus, 158 Tupi, oil site, 159 urbanization pattern, 166 urban population, 163e increase, 153 urban systems, 167e urban unemployment, 171e Walmart, impact, 182 wealth distribution, improvement, 167 Brigade Road (commercial market), 132 Build-to-suit (BTS) multitenanted buildings, development, 115 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 Index C Calcutta (Kolkata), secondary market, 138–139 Campinas (second tier city), 193–194 Capital markets, cross-border investor access, 18 Central Business Districts (CBDs), 79 losses, 115 saturation, 132 Chandigarh IT/ITES/BPO attraction, 140 tertiary city, 140 Changing Island, 74 Chengdu (secondary market), 28–29, 80–82 economic growth, 82 focus, 82 Silicon Valley, 81–82 Chennai Adyar residential neighborhood, 137 Anna Naga residential neighborhood, 137 apartment complexes, construction, 137 Besant Nagar residential neighborhood, 137 company involvement, 109 infrastructure improvements, 137 IT corridor, activity, 137 manufacturing cluster, 126 office market, 136–137 Outer Ring Road (ORR), improvements, 137 real estate investment, 113 residential market, 137 retail market, 137 secondary market, 136–137 Suburban Business Districts (SBDs), 113 China, 27 active seniors housing, 84–85 aviation infrastructure, development, 40–41 banking sector, problems, 34–35 bid-auction-listing system, implementation, 71 Printer: Courier/Westford 225 building space, total stock (level), 50 capital account liberalization, 33, 35 capital inflows, 35 car ownership, increase, 94 central bank, exchange-rate regime adoption, 34 chance, role, 47 Class A office buildings demand, strength, 58 supply, demand, 60 commercial real estate investment, dispersal, 56 communications, 41 competitive advantage, 47 competitive positioning, Porter critique, 41–44 competitors, number/quality, 52 consumer price inflation history/forecast, 32e, 57 consumption, 29 Cooperative Joint Venture (CJV), 53 core office purchase, 85–86 core retail purchase, 86 corruption, 27–28 Corruption Perception Index, 37 credit rating, 35 currency revaluations, 33–34 demand conditions, 45–46 developing country, transition, 39 distressed properties, 94 domestic economy, short-term direction, 70 double taxation issue, 89 due diligence, issue, 56 economic environment, 31–41 entry/ext, difficulty, 52 equity ratio, 55 transactions, real estate FIE involvement, 55 equity joint venture (EJV), 53 exports production, manufacturing facilities (foreign company interest), 64 factor conditions, 42–43, 44–47 factor-creating mechanisms, 44–45 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 226 China (Continued ) finance sector, 34–35 firm strategy/structure/rivalry, 43–44, 46 fixed-return provision, allowance, 55 floating real estate investment trust (REIT), risks, 89 foreign investment, 35 Foreign Investment Enterprise (FIE), 53 formation documents, 53–55 schedule, 54e foreign real estate companies, market entry, 49 fundamental needs, 60 General Office of the State Council, control notice, 64 government, role, 46–47 gross domestic product (GDP), 31–32 history/forecast, 32e gross foreign debt, 34 growth expectations, Economist Intelligence Unit (EIU) forecast, 31 zones, 29–31 high-density luxury units, construction, 89–90 high-speed rail link, 41 high-value-added sectors/industries, investment (encouragement), 44 home demand conditions, 43 hotel/hospitality sector, 64, 66, 71–72 hotel market, overview, 67e housing floor space, increase, 60 industrial investment, 89 industrial land, assignation, 71 industrial market, overview, 65e industrial parks/buildings, development, 89 industrial sector, 62–64 industrial zones, growth, 62, 64 industry potential, 51 inflation, 32–33 infrastructure, 39–41 institutional environment, 31–41 Printer: Courier/Westford INDEX international retailers, growth, 58 interprovince highway network, 40 investment destinations, 28 investment-grade properties, 48 investment strategies, 84–98 land cost, increase, 66 legal considerations, 52–56 liquidity, 34 loan-to-value (LTV), increase, 57 logistics parks/buildings, development, 89 low-cost manufacturing domination, 29 low-cost undifferentiated goods, production, 46 macro-economic policies, 77 manufacturing, 36 market environment, 29–47 market growth rate/size, 51 mass residential market, growth, 69 mezzanine financing, 94–96 mid-level residential development, 89–92 mixed-use development, 96–98 MNC FDI, 47 monetary policy, 33–34 national factors, advantages, 42–43 nonperforming loans (NPLs), 34–35 nonperforming real estate loans, 94 office market, overview, 59e, 68–69 office sector, 58–60 offshore investment, prohibition, 55 onshore investment restrictions, 55 opportunity, 28 port construction, investment, 40 port facilities, improvement, 40 primary growth zones, 30e primary markets, 28–29, 66–80 primary retail property market, demand, 62 production, MNC movement, 62 productivity, 52 product lines, breadth, 51–52 property market practice, 215e terms/practices, 215e–217e property sectors, 56–66 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 Index purchase power parity (PPP), 29 railway development program, 40 real estate investment trust (REIT), creation, 86–89 real GDP growth, 31–32 real property, ownership, 57 regional demographic trends, 38e regulatory considerations, 52–56 Renmnbi-dominated assets, value, 49 Renmnbi exchange rate history, 33e residential market, overview, 61e, 69–70 WTO, impact, 77 residential mortgage-backed securities (RMBSs), establishment, 56 residential sector, 60–62 retail market, overview, 63e, 70–71 retail mortgage market, liberalization, 57 retail properties, economic environment, 70–71 retail sector, 62 retail space, total stock, 71 rural-to-urban migration, 44 rural unrest, 36 secondary cities, real estate markets (offering), 81 secondary industry, ownership structure, 31 secondary markets, 80–84 second-tier cities, potential, 56 selective factor disadvantages, 45 self-use exception, 55 shipping, investment, 40 short-term capital flows, monetary policy (impact), 33–34 State Administration of Foreign Exchange (SAFE) foreign currency purchase money, conversion, 57 regulations implementation, 48, 57 state-owned enterprise (SOE) sector, 46 suburban retail malls, development, 93–94 Printer: Courier/Westford 227 supporting industries, 43, 46 technology, 52 telecommunications sector, expansion, 41 tourism, 36 transparency absence, issues, 56 transparency international rates, 37 transportation, 41 unilateral top-down decisions, 47 urban areas building floor space, 50e luxury residential development, 92–93 urbanization, 36–37 impact, 48 urban population growth, estimates, 56 urban residents, unemployment rate, 39 urban retail malls, development, 93–94 white-collar buyers, targeting, 89–90 Wholly Foreign-Owned Enterprise (WFOE), 53 work force, 49 world’s workshop, 29 China National Development and Reform Commission, guideline, 55–56 China real estate FDI, 50–52 foreign investment, legal aspects, 219 infrastructure, 39 investment, 28 market, 48–56, 58 characterization, 51 private investor access, 53 partner, location, 56–57 China real estate sector developer number, 57 fragmentation, 48 growth, 50 investment capital flow, 49 NPL problem, 35 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 Printer: Courier/Westford 228 Chongqing (secondary market), 29, 80 Cidade Nova, 202 Circular of the National Development and Reform Commission on the Further Enhancement and Regulation of the Administration of Foreign Investment Projects (China National Development and Reform Commission guidelines), 55–56 Class A office buildings, demand (strength), 58 Closed-ended commingled funds, investment, Cochin IT/ITES investment, increase, 140 Special Economic Zones (SEZs), initiation, 140 tertiary city, 140 Commercial mortgage-backed securities (CMBSs) origination/trading, public debt investing, tranches, origination/values, impact, Commercial property, yields, 133 Community centers, retail sector, Competitive Advantage of Nations (Porter), 41–42 Competitive Advantage of Nations (Porter Diamond Model), 42e Construction timeline, reduction, Consumer Price Index (Brazil), 161e Cooperative Joint Venture (CJV), 53 Core real estate, 7–8 Core stabilized office investment, 140–141 Country risk income level ranking, 203e–204e reduction, 23 Country risks mitigation, 23–26 Cross-border direct investments, increase, 18 Cross-border investing, 17 INDEX Curitiba (second-tier city), 176, 193–194 Currency hedge, 24 portfolio, construction, 24 revaluations, 33–34 risk, 23, 24 D Dalian (secondary market), 28–29, 80, 82–83 domestic demand, increase, 83 economic growth, stabilization, 83 software industry, 83 tourist destination, 82 Delhi, 103, 134–136 Central Business Districts (CBDs), 134 company involvement, 109 groupings, 134 hardware/peripherals manufacturing firms, clusters, 126 high-end residential properties, supply, 136 manufacturing cluster, 126 National Capital Region (NCR), 113 office space completion, 135 real estate market, increase, 135 primary market, 134–136 residential leasing market, expatriate demand (impact), 135 residential market, 135–136 retail market, 135 Shahjehanabad, commercial hub, 134 Suburban Business Districts (SBDs), 113, 134 Direct property investment, Diversification benefits, application, 18 consideration, 8–9 increase, 18–19 Dollar-dominated leases, 24 Due diligence requirements, 56 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 Index E Economic Freedom of the World (EFW) rating, 23 Economic performance, divergence, 25–26 Economic risk, 22–23 mitigation, 24–26 political risk, relationship, 22–23 Efficient frontier, 17e Emerging countries, cross-border direct investment, 18 Equity investments, risk, Equity joint venture (EJV), 53 Euro-denominated leases, 24 F Fiscal Responsibility Law (Brazil), 160 Foreign currency purchase money, conversion, 55 Foreign Direct Investment (FDI), 27 Brazil, 159–160 China, 53–55 India, 101–102 Foreign Investment Enterprise (FIE), 53 formation documents, 53–55 schedule, 54e Foreign real estate companies, market entry, 49 For-lease residential development, 141 For-sale residential development, 141 Four Quadrant Model, Free-floating exchange rate (Brazil), 161–162 Fundamental revenue source, derivation, Futian, Central Business District (CBD), 79 G Gini coefficient (increase), Chinese Academy of Social Sciences (CASS) study, 39 Global capital markets, synchronization (increase), 25–26 Global commodity prices, impact, 162 Printer: Courier/Westford 229 Global Property Index Annual Total Returns by Property Sector (IPD), 4e Gorgaon-Kandivali-Borvali, residential space (increase), 131 Gross Domestic Product (GDP) absolute level, 23 Brazil, 154–157 China, 31–32 India, 101 Gross Fixed Investment (GFI), Brazil, 159–160 Growth markets, increase, 17 Guangzhou (GZ) (primary market), 28–29, 76 economic outlook, 78 industrial market, 80 manufacturing plants, concentration, 64 office market, 77 residential market, 77 retail markets, 77–78 value-added activities, 76 world’s workshop, 78 Gujarat, growth, 103 Gurgaon building designs, IT company preferences, 134–135 capital values, appreciation, 116 infrastructure, problems, 135 H Hangzhou (secondary market), 29, 80 Historic Return Correlations (NCREIF), 10e Hong Kong Property Tax/Profits Tax, 89 special-purpose vehicle (SPV), 89 Hong Kong-Macau-Zhuhai Bridge, completion, 76 Hotel investment, Hyderabad INFOCITY, 138 IT/ITES/BPO sector, commercial space driver, 138 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 230 Hyderabad (Continued ) real estate investment, 113 secondary market, 138 Hyderabad, company involvement, 109 I IBM PC division, Lenovo acquisition, 45–46 Idiosyncratic risk, 18 India, 101 agricultural sector, weakness, 110–111 apartments, for-lease residential development, 141 average yearly rupee exchange rate, U.S dollar (contrast), 108e Bangalore, primary market, 131–134 build-to-suit (BTS) multitenanted buildings, development, 115 business-class hotels, 141–143 Calcutta (Kolkata), secondary market, 138–139 call center industry, change, 109 capital flows, 107–108 Central Business Districts (CBDs), losses, 115 Chandigarh, tertiary city, 140 Chennai, secondary market, 136–137 cities/corporate players, 109 Class A offices demand, strength, 116 level, elevation, 115 space, rents (trend), 115–116 Cochin, tertiary city, 140 competitors, number, 112 consumer attitudes/wants (change), 125 core stabilized office investment, 140–141 currency, constancy, 108 Delhi, primary market, 134–136 disposable incomes, increase, 101 economic performance, 105–107 economic policy, 105 economic summary, 110–111 Printer: Courier/Westford INDEX economy, 103–104 entry, ease, 112 exit, ease, 113–115 FDI regulation, change, 101–102 fiscal deficit, improvement, 105 fiscal position, weakness, 110–111 five-star luxury hotels, 141–143 foreign debt, 107–108 foreign direct investment (FDI), 107–108 for-lease residential development, 141 for-sale residential development, 141 fundamental growth factors, 101 GDP growth, 101 global outsourcing trend, 109 global standards/trends, knowledge, 111 growth, occurrence, 103 Gurgaon, capital values (appreciation), 116 high-end apartments, development, 118, 121 home loans, availability, 118 hospitality demand, increase, 143 impact, 141–143 hotel/hospitality sector, 126–128 hotel market, overview, 129e housing shortage, 118 Special Action Plan, impact, 118 values, increase, 118 human capital advantage, 109 human development indicators, improvements, 107 Hyderabad, secondary market, 138 income growth, 101 industrial market, overview, 127e industrial sector, 126 industry potential, 111 inflation rate, 105 infrastructure, 109–110 problem, 110 international-standard space, demand, 148 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 Index investment strategies, 140–152 IT/ITES/BPO expansion, impact, 148 global market, share (increase), 109 IT/ITES/BPO job creation, impact, 118 IT sector, growth, 104, 115 key economic indicators, 106e, 107e land banking, 144–145 land investment, 144–145 land site demand, increase, 118, 121 land values, capital appreciation, 149 luxury apartments, availability (scarcity), 116 malls development, 150 large formats, introduction, 125 manufacturing clusters, 126 map, 114e market environment, 102–111 market growth rate, 111 market share stability, 112 middle class, disposable income/purchasing power (increase), 125 mortgage finance, change, 146–147 industry, 145–147 rate, decrease, 121 multinational corporation (MNC) outsourcing, 148 Mumbai, primary market, 128–131 negative working capital, creation, 121 non-resident Indians (NRI) capital flows, 110–111 impact, 112 office cubicles, plug and play move in, 115 office development lease, 147 sale, 147–148 office market, overview, 117e office sector, 115–116 office space, demand, 148 Printer: Courier/Westford 231 population growth, 101, 102 ports, 110 primary markets, 128–136 prime lending rate, 122e prime residential locations, leasing activity (increase), 122 private airlines, service (increase), 128 product lines, breadth, 111 properties, cold shell form, 115 property sectors, 115–128 Pune, tertiary city, 139 purchasing patterns, 112 purchasing power, increase, 123, 125 rail network, extensiveness, 110 real estate capital appreciation, 144–145 government perspective, 114–115 investment, occurrence, 103 market, 111–115 real GDP growth, 105 regional economic growth, 104e research and development (R&D) new development, sale, 147–148 office space, demand, 148 residential market construction activity, increase, 121–122 driver, 121 overview, 119e–120e residential sector, 116–122 retail development, 149–150 retail market, overview, 124e retail sector, 122–125 challenges, 125, 149–150 corporations, involvement, 123 government liberalization, 123 licensee/franchisee, impact, 122–123 RevPAR growth rank, 126 roadway system, congestion, 151 rupee, stability, 108 rural-urban migration, 102–103 secondary cities, IT/ITES/BPO opportunities, 136 secondary markets, 136–140 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 Printer: Courier/Westford 232 India (Continued ) serviced apartments, for-lease residential development, 141 shopping environment (quality increase), foreign investor (opportunities), 123 Special Action Plan, 118 Special Economic Zones (SEZs), 126 developments, 149 initiation, 140 Suburban Business Districts (SBDs), 113, 134 emergence, 115 IT company targeting, 116 telecom sector, growth, 104 tertiary cities, 139 total external debt, increase, 108 tourism industry, performance problems, 126, 128 Transit-Oriented Development (TOD), 150–151 urban areas, land values (capital appreciation), 149 urban growth, 101 urban population, impact, 102–103 Industrial properties, categorization, Industrial zones, growth, 62, 64 Inflation Brazil, 160–161 China, 32–33 hedging, 19–20 India, 105 real estate, hedging ability, 20 INFOCITY (Hyderabad), 138 Institutional-grade apartments, unit count, 5–6 International market capitalization, 17 International Property Databank (IPD) Global Property Index Annual Total Returns by Property Sector, 4e real estate returns tracking, International real estate returns, potential, 14–18 risks, 22–23 INDEX International real estate investment, 13 engagement, ability, 21 reasons, 12–22 risks, increase, 25 International retailers, growth, 58 Investment-grade properties, 48 Investment-grade real estate universe, 21e Investment phases, 9–10 development, repositioning/redevelopment, 9–10 stabilization, Investments, return (sacrifice), 1–2 Investment styles, 7–9 core strategy, 7–8 opportunistic strategy, 8–9 J Joint venture, participation, 25 K Kolkata (Calcutta) real estate sector, lag, 138–139 secondary market, 138–139 L Laotian New Town, 74 Loan-to-value (LTV), increase, 57 Local currency-denominated leverage, usage, 24 Local knowledge, usage, 25 Long-term private real estate returns, attraction, 15 Long-term total returns, asset type, 14e Low-cost countries, existence, 43 M Maharashtra, growth, 103 Malaysia, MNC investment, 45 Mezzanine financing, 94–96 Mixed assets, annual total returns, 16e, 18e Mixed-use development, 96–98 Mixed-use properties, sector combination, 6–7 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 Index Modern Portfolio Theory (MPT), usage, 10 Multifamily properties, 5–6 Multinational corporations (MNCs) investment, 45 outsourcing, 148 Mulund-Thane-Bhandup, residential space (increase), 131 Mumbai, 128–131 Andheri-Kurla Complex, construction activity, 128, 130 Bandra-Kurla Complex, construction activity, 128, 130 capital values, stability, 130 company involvement, 109 Gorgaon-Kandivali-Borvali, residential space (increase), 131 manufacturing cluster, 126 Mulund-Thane-Bhandup, residential space (increase), 131 office space, growth, 128, 130 population, 128 primary market, 128–131 real estate investment, 113 rental values, stability, 130 residential development, 131 residential market, 130–132 retail market, 130 Suburban Business Districts (SBDs), 113 suburban locations, growth, 131 upper-middle/luxury-class developments, 131 N Nanjing (secondary market), 29, 80 National Capital Region (NCR), 113 National Council of Real Estate Investment Fiduciaries (NCREIF) Historic Return Correlations, 10e Property Index Annual Total Return by Property Sector, 4e real estate investment tracking, 3–4 Negative working capital, creation, 121 Neighborhood retail sector, Printer: Courier/Westford 233 Nonperforming loans (NPLs), 34–35 portfolios, collateralization, 94 Northwest Logistics Center, 76 O Office leases, duration, Office sector properties, categorization, 4–5 Offshore investment, prohibition, 55 Onshore investment restrictions, 55 Open-ended commingled funds, investment, Opportunistic strategy, 8–9 development, Outer Ring Road (ORR), 132 improvements, 137 popularity, increase, 133 Overseas investors, REIT strategy, 88–89 P Pan-Asian production system, 36 Pearl River Delta (primary real estate market), 31 development, 78 GZ strategic location, 76 specialization, 31 People’s Republic of China (PRC), provinces (regional breakdown), 37 Political risk, 22 economic risk, relationship, 22–23 mitigation, 24–26 Porter, Michael, 41 Porter Diamond Model, 42e Porter’s Diamond, 42 Portfolio performance, 16–17 Porto Alegre (second-tier city), 176 home sales velocity, 200 Prime lending rate (India), 122e Private equity, impact, 2–3 Private real estate behavior, 19 correlation level, 19 diversification, 19 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 234 Property Index Annual Total Return by Property Sector (NCREIF), 4e Property sector investing, 3–7 Public real estate, behavior, 19 Pudong International Airport, expansion, 75–76 Pudong International Airport Logistics Center, 76 Pune company involvement, 109 IT/ITES/BPO projects, initiation, 139 Software Technology Park (STP), development, 139 tertiary city, 139 Purchasing power parity (PPP), 23, 29 Q Qingdao (secondary market), 29, 80 R Real estate dollar-dominated/Euro-dominated leases, 24 FDI, changes, 27–28 hybrid nature, 15 inflation-hedging capability, 19–20 investors, returns, 21 market, 48–56 returns, IPD tracking, universe, expansion, 21–22 Real estate investment fundamentals, NCREIF tracking, 3–4 quadrants, 2e strategies, 7e vehicles, risk/liquidity, 3e Real estate investment trusts (REITs), creation, 86–89 exit strategy, 56 shares, trading, structure, creation, 17 Real estate operating companies (REOCs), Regional centers, retail sector, Printer: Courier/Westford INDEX Regional trading zones, creation, 25 Renminbi exchange rate history, 33e regime, adoption, 34 Renminbi value, increase, 80 Residential mortgage-backed securities (RMBSs), establishment, 56 Retail sector, formats, Returns, potential, 14–18 Return-to-risk ratio, 16 Richmond Road (commercial market), 132 Rio de Janeiro, 202–203 economy, 166–167 industrial real estate attractiveness, 193 office stock distribution, 202 shopping center attractiveness, 184 vacancy rate, 202–203 submarket ranking, 202e Risk-adjusted return, result, 16 Risk measure, 18 Risk mitigation, active strategies, 25 S Sao Paulo currency, depreciation, 202 domestic market capitalization expansion, 174–176 economic downturn, 202 economy, 166–167 homes sales velocity, 199–200 industrial market, size, 193 industrial real estate attractiveness, 193 industrial rent growth, 172 office market, 176 shopping center supply, 182–183 stock distribution, 201e Stock Exchange, domestic market capitalization expansion, 174–176 Self-use exception, 55 SELIC (Brazil), 162 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 Printer: Courier/Westford 235 Index Shanghai (primary market), 28–29, 72 annual disposable income per capita, 78–79 Changing Island, 74 Class A office rent, increase, 73 total stock, 77 economic growth, 72 economic indicators, 73e en-bloc office sales, 73 gross floor area (GFA), 76 industrial base, 75–76 industrial locations, focus, 76 industrial parks, 76 International Automobile Town, 76 investment returns, level (elevation), 80 land-leasing system, 78–79 Laotian New Town, 74 manufacturing plants, concentration, 64 Microelectronics Industrial Base, 76 MNC, number (increase), 80 new town development, 74 office leasing market, 72–74 Pudong International Airport, expansion, 75 residential market, 74 retail sector, 75 retail spaces, average rent (forecast), 75 Signup New City, 71 World Expo 2010, 74 Xuxi District, 74 Shenzhen (primary market), 28–29, 76, 78–79 office market, growth, 79 residential market, growth, 79–80 Signup New City, 74 Singapore, MNC investment, 45 Single-tenant stores, retail sector, Software Technology Park (STP), development, 139 Special Economic Zones (SEZs), 126 developments, 149 Stabilization, occurrence, State Administration of Foreign Exchange (SAFE) foreign currency purchase money, conversion, 55 regulations, implementation, 48, 57 State-owned enterprise (SOE) sector, 46 Suburban Business Districts (SBDs), 113, 134 Super-regional centers, retail sector, T Taiwan, MNC investment, 45 Thailand, MNC investment, 45 Tianjin (secondary market), 29, 80 Total returns, asset type, 15e Transit-Oriented Development (TOD), 150–151 Trophy office buildings, location, U UK private real estate, 16 United States, urban systems, 167e U.S dollar average yearly rupee exchange rate, contrast, 108e Real, comparison, 162 U.S inflation, 20e U.S large capitalization stocks, 16 U.S private real estate, 20e U.S public real estate, 16 V Value-added phase, 9–10 Value-added strategy, W Waigaioqaio Logistics Center, 76 Wholly Foreign-Owned Enterprise (WFOE), 53 World Expo 2010, 74 P1: TIX/b ind P2: c/d JWBT340-Lynn QC: e/f T1: g August 11, 2010 13:1 Printer: Courier/Westford 236 World markets, economic growth correlation (Brazil), 160e Wuhan (secondary market), 28–29, 80, 83–84 FDI destination, 83 logistics/commercial center, 84 technology research/education center, 84 thoroughfare, 83 INDEX X Xuxi District, 74 Y Yangshan Deepwater Port, 76 Yangtze (primary real estate market), 29 Z Zona Sul, 202 LYNN WANG THE FRANK J FABOZZI SERIES Praise for Jacket Image: © iStockphoto “An indispensible tool for executing successful international real estate investment strategies with a focus on the biggest and fastest growing emerging markets This is the only book of its kind A must-have for serious investors.” —STEPHEN M RENNA President of the National Association of Real Estate Investment Managers “David Lynn and Tim Wang combine their extensive industry experience in real estate research and strategy into an insider’s look at how the professionals think about and act on international real estate opportunities Reading this book is like having a preferred seat on the investment committee at a major international real estate investment firm.” —DR DAVID FUNK Director of the Cornell University Program in Real Estate “For anyone considering investing or working in real estate in China, India, or Brazil, this is the definitive starting point David Lynn and Tim Wang provide a timely and thorough introduction to each country’s economy and nascent real estate markets.” —DR PETER LINNEMAN Principal of Linneman Associates and the Albert Sussman Professor of Real Estate, The Wharton School “A compelling argument for investing in real estate opportunities in China, India, and Brazil This is the most comprehensive discussion of topics and investment strategies that real estate investors must consider when evaluating emerging markets.” —ROBERT M WHITE, JR., CRE Founder and President of Real Capital Analytics Inc “The best guide there is to real estate markets in the high economic growth countries of Brazil, India, and China If you are a private equity investor contemplating emerging market real estate, read this book.” —JAMES FETGATTER Chief Executive Officer, Association of Foreign Investors in Real Estate (AFIRE) EMERGING MARKET REAL ESTATE INVESTMENT TIM WANG, PHD, is Senior Vice-President and Senior Investment Strategist with the Research and Investment Strategy Group at ING Clarion Partners Dr Wang joined ING Clarion Partners in 2006 and has authored more than fifty internal and external real estate investment strategy and market research articles and book chapters He is a frequent speaker at industrial conferences Tim holds an MBA from New York University and a PhD from the University of Georgia EMERGING MARKET REAL ESTATE INVESTMENT Investing in China, India, and Brazil DAVID J LYNN, PHD, is an institutional real estate investor, strategist, and portfolio manager with extensive experience in national and international markets Currently, he is Managing Director, Head of the Research and Investment Strategy Group, and Generalist Portfolio Manager at ING Clarion Partners In this capacity, he directs the firm’s strategic and tactical investment decisions regarding investment portfolios He is also a member of the Investment and Operating Committees, where he makes decisions on billions of dollars of new investments, portfolios, fund strategies, and dispositions Lynn’s theoretical work has yielded new approaches and analytical techniques in the areas of active portfolio management, market forecasting, financial distress, and emerging markets He has published widely on the subjects of real estate investment, development, economics, and land use Lynn has written or coauthored over seventy articles, internal investment and strategy papers, and three major books, including Active Private Equity Real Estate Strategy He writes a highly regarded column called “Capital Trends” in National Real Estate Investor magazine and is frequently cited in the media for his views on the economy and the real estate industry Lynn earned his PhD in financial economics from the London School of Economics, where he also earned a master of science specializing in finance He holds an MBA from MIT’s Sloan School of Management $60.00 USA/$72.00 CAN I n recent years, China, India, and Brazil have received much attention, and rightfully so They are among the biggest and fastest-growing economies, encompassing a significant percentage of the world’s land coverage, 30 percent of the world’s population, and amounting to a combined gross domestic product (GDP) of more than twelve trillion dollars While there are ample real estate investment opportunities available in these and other emerging markets, understanding the dynamics of this important asset class is essential if you intend on making prudent investments Focusing primarily on private equity real estate investment in China, India, and Brazil, this reliable resource details an approach to commercial real estate investment in emerging markets and illustrates several strategies and analytical methods crucial to successful investment Filled with in-depth insights and expert advice, Emerging Market Real Estate Investment focuses on investment themes and strategies as well as the economic, legal, and institutional environment of each country EMERGING MARKET REAL ESTATE INVESTMENT Investing in China, India, and Brazil DAVID J LYNN, PHD with TIM WANG, PHD 1807c Opening with two informative chapters that provide an overview of the fundamentals of commercial and international real estate investment, this practical guide also includes in-depth country-specific chapters on China, India, and Brazil These chapters contain: • An examination of the economic, institutional, and political environment of each country • A discussion of the main features of each real estate market, including real estate foreign direct investment (FDI) • A review of the major real estate markets and submarkets in each country • An analysis of the four or five primary real estate sectors in each country: office, retail, residential, industrial, and hotel where applicable • A discussion of real estate investment options and strategies Whether you’re an institutional or private investor, the ability to achieve higher returns and portfolio diversification—while accessing a larger investment universe—is essential Emerging Market Real Estate Investment will show you what it really takes to make this happen and put you in a better position to excel when investing in real estate abroad ... of Real Estate Investment Investing by Property Sector Investing by Style Investing by Phase Asset Allocation Notes CHAPTER Investing in International Real Estate Why Invest in International Real. .. Equity Real Estate Strategy by David Lynn ii P1: TIX/OSW P2: c fm JWBT340-Lynn August 18, 2010 22:2 Printer: Courier/Westford Emerging Market Real Estate Investment Investing in China, India, and Brazil. .. important emerging market real estate arenas: Brazil, China, and India Their long experience in real estate markets and the hundreds of interviews he has conducted gives book unique insights into investing