Bloomberg News

Macquarie-Backed MGPA Sees Once-in-Decade Europe Bargains

September 16, 2012

MGPA, a fund manager controlled by Macquarie Group Ltd. (MQG) managing $11 billion in property assets, is raising money to invest in European real estate and plans its first Australian property investment within six months.

“There’s going to be some interesting, once-in-a-decade opportunities to acquire assets at below replacement cost prices in markets that have some reasonable prospects for growth” in Europe, Executive Chairman James Quille said in a telephone interview from Singapore on Sept. 14. In Australia, a withdrawal of lenders from commercial property “has caused a big widening in spreads between prime and secondary assets.”

Australian banks have cut outstanding lending to commercial property by 15 percent since its 2009 peak, driven by an increase in non-performing loans and the exit of some foreign- owned lenders, according to the Reserve Bank of Australia. In Europe, the amount of new lending for commercial real estate fell by about 77 percent from 2007 through 2011, estimates by CBRE Group Inc. show.

The Singapore-based group -- formerly Macquarie Global Property Advisors, of which Australia’s biggest investment bank still owns 56 percent -- last month opened its first Australian office in Sydney and appointed Hamish MacDonald, its former U.K. head of acquisitions in London, to run it, Quille said.

It’s seeking offices and retail properties in cities including Sydney and Melbourne for its new open-ended Asia fund targeting German institutions, he said. The fund has raised about 85 million euros ($111 million) and is targeting as much as 500 million euros in the next three to four years, according to Quille.

Property ‘Attractive’

“Property is an attractive asset class, particularly in relation to the very low yields you can earn on other reasonably safe defensive-type investments,” Stuart Cartledge, Melbourne- based managing director of Phoenix Portfolios, said in a telephone interview. “For office, we’re coming from a position of low vacancies and a strong economy, while supply of retail space has been pretty light.”

Australian offices recorded net absorption of 73,900 square meters (795,453 square feet) in the three months ended June 30, and while tenants will remain “cautious” in the 2013 fiscal year, supply is “well-managed,” Andrew Ballantyne, Sydney- based head of capital markets research at broker Jones Lang LaSalle Inc., said in a release in July.

Vacancy rates across Australian retail properties, which rose to 3.5 percent as of June 30 from 3.2 percent on Dec. 31, are expected to stay stable in the second half before declining in 2013, Andrew Quillfeldt, Sydney-based head of retail management at Jones Lang, said in a separate July release.

New Funds

While MGPA is also on the lookout for controlling interests in Australian property companies and mezzanine debt opportunities, it hasn’t found anything appealing, Quille said. The group will add staff in Australia as needed, he said.

MGPA is also raising capital for its fourth European fund, Quille said. It sees value in Germany, the U.K., France and Poland and will invest in both property debt and equity, he said.

The group plans to begin raising capital for its fourth Asian fund by the end of 2012, according to Quille. Across Asia, MGPA is focused on Hong Kong, Japan, Australia, Singapore and China, and watching Malaysia and Indonesia, he said.

MGPA also plans to create funds specifically for Australian and Japanese investors beyond 2013, Quille said. The investment destinations for these funds are undecided, he said.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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