Monday, June 27, 2011

Interview: Mr. Choi Joong-kyung, Minister of Knowledge Economy

Minister of knowledge Economy Choi Joong-kyung is a veteran finance official who has served in key finance posts in the government and Blue House. He passed the civil service exam in 1978, beginning his career as a finance official. He was appointed vice minister at the Ministry of Strategy and Finance when President Lee took office in February 2008 and pushed a weak won policy to boost the country’s exports during the recent financial crisis. He also held the post of President Lee’s senior secretary for economic affairs.
In an exclusive interview, he speaks about his priorities and plans for this year.
What are your main priorities for this year, and what is your proposed action plan?
Korea posted the world’s seventh-largest export volume in 2010 and overcame the global economic crisis. However, Korea is still responding to changes in the global economic environment, including the emergence of convergence and green industries. Korea also needs to address imbalances between large companies and small and midsize companies.
To ensure the sustainable growth of the Korean economy, the Ministry of Knowledge Economy (MKE) will nurture industries with significant potential to generate growth and create quality jobs. At the same time, the Ministry will train skilled workers and improve working conditions—for example, with the Quality of Working Life Valley. This project will involve turning outdated industrial complexes into multipurpose facilities that not only serve as workplaces, but also as education centers and cultural spaces. In this way, the government will attract more young people to the fields that most need workers.
In addition, the Ministry will establish a stable supply base for energy and resources in response to international price fluctuations. We will pursue more FTAs to expand Korea’s access to advanced markets. Furthermore, by strengthening industrial cooperation with emerging economies, we will achieve $1 trillion in annual trade.
In the process of implementing these policies, the Ministry will communicate closely with businesses and help them resolve any difficulties they may be facing. We hope foreign investors, who have played such an important role in the Korean economy, will invest more in the future.
How is the Ministry implementing the green growth strategy?
Korea’s green growth policy has two aims: to preserve the natural environment and to help the nation achieve sustainable growth. As of 2007, Korea ranked 38th in the world in terms of GDP per capita, and the economy needs to maintain a steady path of growth.
Korea is a nation with immense growth potential, and the government intends to encourage sustainable economic and employment growth by strengthening its efforts to address climate change. We will do this by improving energy efficiency, advancing the clean energy industries, promoting industrial convergence, and pursuing greater innovation in R&D.
The Framework Act on Low-Carbon, Green Growth was enacted on April 14, 2010. The Act requires the adoption of specific targets for energy efficiency and GHG emissions for different business categories. It also mandates the adoption of a certification program to attract green investment. Both the certification system and the strategy to reach our energy efficiency and GHG emissions targets will be in place before the end of 2011.
Furthermore, the government is making a proactive effort to strengthen the institutional framework for renewable energy and energy conservation measures. By the end of the year we will develop a strategy to enter the overseas renewable energy market and gain a sufficient share of the global market to create an export industry. To prepare for the adoption of the Renewable Portfolio Standard in 2012, the Enforcement Decree of the Act will be revised and a detailed action plan will be in place by the end of June.
What steps are you taking to increase Korea’s self-sufficiency rate in oil and gas resources? Could you tell us about support to local renewable energy test projects?
Korea depends on imports for 96.2 percent of its energy needs (2009). According to the IEA, Korea is the world’s 10th major energy consumer and its No. 9 petroleum consumer (2007). Clearly, energy self-sufficiency is an important goal because fluctuations in international energy prices affect key economic indicators such as the current account balance.
In pursuit of this goal, Korea continually seeks to improve energy efficiency and expand the use of clean energy so that we can cut dependence on fossil fuel to no more than 60 percent. By reducing demand for energy in every category (industry, transport, household, commerce), we will improve energy efficiency by 2.6 percent every year until 2030. By that time, renewable energy will account for 11.5 percent of Korea’s total energy consumption and nuclear energy will account for 27.8 percent. Development of the green industries will transform Korea’s industrial structure into one that is less energy intensive.
The government said it will set aside 700 million won from MKE and an additional 700 million won from the Small and Medium Business Administration to support the Commission of Shared Growth for Large and Small Companies. What other steps are you taking to support SMEs?
Like most countries, Korea has a variety of support policies for small and midsize enterprises (SMEs). These include tax incentives, policy funding support, technology development support and a public procurement program.
The global financial crisis hit SMEs especially hard. Accordingly, the Korean government worked to overcome the financial crisis through pre-emptive measures such as massive injections of liquidity for SMEs (e.g., extending maturity dates for 160 trillion won worth of SME loans; 37 trillion won worth of additional loan guarantees; a higher guarantee rate of up to 100 percent).
Going forward, the government plans to revise its SME support policies to better reflect the needs of the self-employed, small traders and small enterprises and to ensure that SMEs develop and grow into stronger companies. At the same time, the government will adhere to the principles of “support and nurture” and “free competition” to encourage the phased development of promising SMEs into large companies.

Thursday, June 16, 2011

Interview: Mr. Robert Gilchrist, Founder & CEO, Rockspring Property Investment Managers LLP

Rockspring Property Investment Managers LLP, now in it’s 27th year, specialises in the acquisition and management of commercial property throughout the UK and continental Europe on behalf of over 220 major institutional clients from around the globe. On behalf of single-client accounts, investment is made either directly into property assets or, indirectly, through the group’s series of tax-efficient, co-mingled investment funds.
Originally established in 1984 as MIM Property Services, Rockspring was one of the first UK-based property managers to specialise in European investment. Working exclusively with institutional investors, the business grew quickly, and in 1993, was bought by Prudential Financial of the USA and became PRICOA Property Investment Management. Following an MBO in 2004, Rockspring Property Investment Managers, as it is known today, was formed. Fully independent and 100% owned by its Partners and employees, Rockspring is headquartered in London with its own network of local investment and asset management offices in Amsterdam, Berlin, Brussels, Budapest, Madrid, Paris and Helsinki. In addition, Rockspring manages client support and services operations via dedicated offices in America and Australia and is in process of opening one Seoul.
Rockspring offers its clients a diverse range of products, from region-wide, pan-European funds to single country and sector specific specialist vehicles. These include the Rockspring Hanover Property Unit Trust, the Rockspring PanEuropean Property Limited Partnership, RockspringTransEuropean II, III, IV & V, The Industrial Trust, Retail Plus, The Rockspring German Box Fund, The Rockspring Portuguese Property Partnership, Rockspring Total Europe, Rockspring UK Value Fund and single client mandates. With property assets currently located in the UK and 12 other European countries, the firm today is one of Europe’s leading property investment managers.
Robert Gilchrist has been with Rockspring for over 23 years and has been active in the European property markets since 1983. After graduating from Cambridge University, he qualified as a Chartered Surveyor and joined Rockspring in 1987. He has been the architect of much of the firm’s significant growth, in particular, the development and launch of new fund products. The first of these was the launch, in 1991, of TransEuropean 1 and the subsequent management of this series of closed-ended funds – TransEuropean V is currently being marketed. In 1998, he was appointed Managing Director. In 2004, alongside Mr. Richard Plummer, the Chairman, he led the successful MBO from Prudential Financial, and was appointed Chief Executive. He has played a leading role in growing Rockspring into one of the UK's leading Europe-wide property investment managers and he continues to be closely involved in new business and overseeing the fulfillment of Europe-wide investment strategies.
Rockspring prides itself on its client-focused approach. “As all of our investment products are funded entirely by equity sourced from third-party, international, blue-chip, institutional clients, everything we do is based on our clear understanding of investors’ needs and ambitions. We invest the time getting to know them and we apply our exceptionally experienced market knowledge and independent status to find solutions that are the ideal fit. It’s an approach that has been proven in every corner of the commercial property market and enabled us to build enduring relationships with leading real estate investors from around the globe,” said Mr Gilchrist.
The recent awards received by the company recognize Rockspring’s enduring commitment to generating value through real estate for its international blue-chip client base. They include ‘Europe Firm of the Year’ - Global PERE Awards 2010, ‘Property Fund Manager of the Year’ – Financial News / Dow Jones Awards for Excellence 2010 and ‘Property Manager of the Year’ - Global Pensions Awards 2011. Mr Gilchrist, commented, “We have spent more than 25 years finding new and innovative ways to create value for our clients. Today, we are fully independent in both structure and spirit and, with a Europe-wide network of property professionals, we work in partnership with our clients to create unique, performance-orientated European property investment vehicles.”
Mr. Gilchrist noted that Rockspring frequently works with global investors looking to invest for the first time in Europe. “It really does help having an experienced local presence throughout Europe.” comments Gilchrist. “Our network of offices across Europe combined with our long history and knowledge of its markets puts us in an exceptional position to advise our clients. For investors that are not inclined towards our tax-efficient co-mingled investment funds, we can assist them co-invest directly in hand-picked assets with other like minded investors in Europe.”
Whilst few investors escaped the global melt down, Rockspring have fared better than many of their competitors. Their core / core plus investment approach combined with their consistent track record and client-centric focus meant investors not only stuck by them, many committed new capital – during 2010 Rockspring closed their UK Value fund with £700m. In 2010 Rockspring invested €1.2 billion across Europe and to 31st March 2011 has seen investments totalling €380m. Notable recent transactions include:
88 Wood Street – acquisition of an iconic, landmark tower building at in the heart of the City of London for £183 million on behalf of a separate client mandate (November 2009)
O’Parinor Shopping Centre, Paris – acquisition of a 51% stake for €223 million on behalf of a separate client mandate (August 2010)
Ferio Shopping Centre, Konin, Poland – acquisition of a retail park for €47m on behalf of the TransEuropean Property Limited Partnership IV (Dec 2010)
The Feulner Portfolio – acquisition of three retail warehouse properties in Neuss, Kassel and the Emspark in Leer, West Germany purchased off-market from a private investor for a total consideration of €62.2 million on behalf of the Rockspring German Retail Box Fund (April 2011)
Speaking on the economic situation in Europe, Mr. Gilchrist noted that the debt crisis has affected everybody around the world in varying degrees. This has resulted in recession in many countries, but has also led to varying responses by national governments. In Europe, there continue to be large regional differences. Greece continues to experience recession, while the Spanish and Portuguese economies have been experienced flat growth. Individual governments are using differing approaches to reduce budget deficits, he noted. This crisis halted the incessant rise in property values that took place from 2003 to 2008, driven as much by the widespread availability of cheap debt as a lack of seasoned understanding of real estate fundamentals.
“We are seeing a steady recovery in economic prospects and confidence in markets. Today a lot of focus on significant fallout has been on Ireland, Portugal, Spain and Greece. They continue to highlight some of the ongoing issues in the European periphery.” said Gilchrist.
However, the recession has not resulted in a significant amount of distressed assets coming onto the market. For instance, in UK there was a peak-to-trough fall in asset values of around 40 percent, but the period of decline was swift and subsequently experienced an equally fast recovery.
“Distress will come about largely as a consequence of the behaviour and reaction of the banks. There is a lot of talk about 2008-9 being one of worst recessions but in my experience 1990-93 was actually worse. The problem then was that a construction boom coincided with recession and oversupply in real estate was much greater then,” he said. The banks, having learnt their lesson, are choosing to hold on to assets today and working through problems before selling them in a steady and unforced manner.
In this context he noted that Korean investors who are selectively looking for landmark assets in UK and Paris are doing so at the right time. “The real estate fundamentals are better. While people may be scared of lower cap rates today, they actually reflect significant rental growth expectations. Their timing is perfectly reasonable and making investments today is safe.”
Typically non-EU investors look at London and it makes sense. London sits alongside New York, Sydney and Tokyo as a global city. It is very much on the radar screen, with Paris a strong second. More adventurous investors may be looking at Germany, Spain or other smaller cities in Europe, but they are in a much smaller proportion.
“One of the reasons I am extremely positive about prospects for investment and ownership in London and Paris is because we are in the middle of the globalisation of everything. Looking back at the London market in 90’s there were only a couple of Japanese, American and European investors. The predominant ownership was by UK institutions. Since then, the market has changed dramatically. Now there are Koreans, Australians, Canadians, Russians and Malaysians to name a few. This is not going to stop.”
In terms of core assets and core market, there is, inevitably, only a limited supply and so competition can be quite intense for investments in the core sectors.
He noted that there isn’t just one ‘right’ answer to the question of how the investors should approach the UK market - either directly or through co-investment club deals, but what is absolutely essential, for any investor that is considering investing globally, is the necessity of access to local expertise before even trying to negotiate and acquire an asset.
“Such investors have to work with a partner in Europe who can provide access to unbiased legal, tax and other structuring requirements in order to fully understand the implications of ownership and returns they can achieve. Once they understand this, then they can start to look at specific transaction opportunities, because by then they know the implications of investing in a particular market,” he said.