Interview: Mr. Lee Jung-whoon, General Manager, Finance & Investment Dept., Korea Asset Management Corporation

has been making contributions to the national economy by helping overcome crisis and develop the economy through various supporting measures for the financial industry.
Nonperforming loans (NPLs) were at the heart of the financial crisis that engulfed the Korean economy during 1997–98. The recovery has also been characterized by a rapid and drastic reduction in the level of NPLs in the financial system.
The government played a leading role in financial and corporate restructuring, including strengthening the legal and regulatory framework, injecting public funds, and reinforcing the functions of nstitutions for crisis management, such as the Korea Asset Management Corporation (KAMCO).
KAMCO played an important role in facilitating the restructuring process and helping to develop financial markets. First, KAMCO purchased distressed assets from banks and other financial institutions, which allowed lending to resume at a time when liquidity was scarce. This objective was complemented by increased supervision to ensure that banks were operating on sound commercial principles.
Second, KAMCO’s resolution of NPLs contributed to the good progress made in Korea in recovering public funds injected by the government for financial sector restructuring. In addition, KAMCO disposed of many of these distressed assets through a number of innovative methods, including by issuing asset-backed securities (ABS), which launched an important new market in Korea.
Mr. Lee Jung-whoon, General Manager, Finance & Investment Dept., KAMCO, speaks about the crucial rope played by the organization and its role ahead.

Could you give us a brief introduction to KAMCO?
Since its inception in 1962, Korea Asset Management Corporation has been making contributions to the national economy by helping overcome crisis and develop the economy through various supporting measures for the financial industry.
During the Asian Financial Crisis in 1997, the national economy was facing the Asian economic crisis. In order to efficiently resolve non-performing loans (NPL) of financial institutions, KAMCO formed the NPL Resolution Fund of 39 trillion dollars, and acquired 111 trillion won of non-performing loans. And since 2009, with a view to proactively coping with global financial crisis, KAMCO has been operating the Restructuring Fund, as a full-time organization for restructuring process.
In addition, KAMCO is in charge of government-commissioned work such as state-owned property management, collection of overdue taxes, and assistance for consumer credit recovery. After the incumbent CEO Young-chul Chang took office, we categorized domestic properties into three: state-owned, financial, and credit properties. KAMCO is trying its utmost in managing all three categories as a comprehensive asset manager of the properties owned by the Korean government.
What is the performance of the NPL Resolution Fund and the Restructuring Fund like?
Using the NPL Resolution Fund, we collected 6.2 trillion won additionally to the amount of public fund invested, by acquiring non-performing loans of the face value of 111 trillion won and resolving 71% of them up to now.
In this process, we also converted some of the non-performing loans into equity, transforming them into blue-chip companies and selling them in the market. Some noticeable examples include Daewoo Heavy Industries & Machinery Co., Dongah Construction Industrial Co. Ltd., and more recently sold Daewoo International.
With lessons learned from the Asian economic crisis, we were able to proactively deal with the recent global financial crisis, by early establishing the Restructuring Fund. Since 2008, we have purchased PF bonds of 8.5 trillion won, swiftly and actively responding to the destabilizing factors of the financial market. In order to support shipping industry in liquidity crisis, KAMCO formed a shipping fund, having purchased 27 ships (worth of 860 billion won) so far.
We understand that your department is responsible for KAMCO’s overseas business. What are the progress and future plans?
KAMCO’s overseas business was launched with the mandate of assisting private sectors in overseas market creation and creating future growth engines of KAMCO, utilizing various domestic and international networks and experiences learned from the post-crisis process of resolving 111 trillion worth of NPL and performing corporate restructuring.
Investment preparedness provided through the revision of law to enable direct investment between 2005 and 2006 triggered full-scale implementation of the overseas business.
In the first round, in 2007, KAMCO acquired properties from a Chinese state-run AMC, followed by the successful investment brokerage in 2008. Afterwards, KAMCO established a local AMC with dispatched staff, and has been in full operation for management and collection.
Our view on the market indicates that, after the global financial crisis, it is high time for us to enter the NPL markets of advanced countries including the US. We are thus currently cooperating with domestic and overseas institutions to screen blue-chip investment grade targets.
This year has goals of exporting KAMCO Model, which is business knowhow accumulated through our on-going training and consulting business for developing countries, and successfully implementing pilot deals of investing in NPL in advanced countries such as the US.
Does it mean that KAMCO is also offering training for overseas institutions?
Yes. Since 2001, we have been providing training courses on our knowhow of NPL resolution and restructuring process, accumulated through overcoming the Asian economic crisis, for many governments such as China, India and Vietnam.
A total of 22 rounds of training courses have been completed, with a purpose of maintaining close relationship with organizations of other countries. In addition, we have concluded MOUs with 17 government organizations from 11 countries, contributing to the heightened international status of KAMCO.
Recently, local pension funds have been showing great interest in US real estate market, with some investment projects already initiated. What is impressive is the speed of the movement by public corporations. Do you have any experiences in the US market? What are they about?
There has been a series of prospects that says the US market shows a sign of recovery starting with the corporate sector, as recently seen in the continuous increase of corporate fixed investment. Both IMF and many IBs are competing in upwardly adjusting future economic growth rate assumptions.
However, a general consensus of the international financial community is that it will not be easy for a huge market like the US to recover in a short period of time. Examples include the increasing non-performance of commercial assets and continued bankruptcies of small-and-medium-sized banks.
KAMCO has also been monitoring the US market for investment ever since the financial crisis, with some cases almost striking the contract. But basically we are still focusing on risk management based on conservatism.
For example, it was in 2008 when we were conducting a preliminary underwriting for the purchase of a 450 million dollar portfolio owned by a global IB, reaching the stage of price negotiation. It was late August. The seller insisted that the asset price was almost bottoming out, but our underwriters said that there would be further dip of about 15% or more. Obviously, the deal was not possible to be closed.
After the failure of negotiation, our underwriting team backed out. And on the 15th of September, Lehman Brothers declared bankruptcy, suddenly elevating the financial risks all around the world, ultimately causing steep rise of foreign exchange rates in Korea and aggravating the investment environment.
So, it turned out to be a good thing that you had to break the deal?
Sure. The asset value was plummeting afterwards, as we had anticipated. And the foreign exchange rate increased by almost 50%. Even if the price was successfully negotiated, it must have been difficult to close the contract.
That was a very clear example of risk management. Also in 2009 and 2010, we had some cases of reaching the point of price negotiation, but we had to use our conservative stance again, believing that there was a possibility of further price drop.
Could you explain the nature of the investment business of KAMCO?
Our target focuses not only income generation but also assistance for the private sector in their overseas business. To do the latter, we are informing Korean institutional investors of high-grade investment targets and helping them with asset management.
Of course, to lead the overall deals, we also need to make some investment at the threshold level. We are also planning to establish JV-AMCs with local organizations, through which we can learn the systems of the countries to be invested and accumulate asset management knowhow. In China, where we had two deals closed, we have already established an AMC, gathering information on local investment systems and grasping the knowhow of asset management.
I am not saying that investment yield is not important. What I mean is that it is an important point of consideration that the intangible assets also need to be acquired at the same time. Domestic pension funds are also welcoming the business structure in which KAMCO participates in overall asset management.
The investment business will start from small-scale projects in advanced countries where the cycle is widely believed to be bottoming out. After making successful investment, we will expand the scale by phase.
First, we plan to start with selective high-grade investment targets out of troubled assets such as NPL or REO owned by local financial institutions. Currently, with a view to acquiring assets under bulk sale by FDIC, we are currently under joint consultation with an organization with successful bidding experiences.
There must be some difficulties experienced by a public corporation like KAMCO in dealing with IB business.
KAMCO has amassed a high international credit standing and credibility with fair business treatment, which are great advantages of our actual implementation of projects.
Currently, we have some difficulties in proactively exploring potential high quality projects, because of the limitation posed by the KAMCO Act, which stipulates that investment targets should be confined to the NPL Resolution Fund. However, we are planning to expand the target investments to the Restructuring Fund by amending the act.
And the issue of relatively long decision-making process as a public corporation could be substantially overcome by sharing roles with private counterparts.
Do you have any parting parting comments for our readers?
According to the IMF estimation, the total loss incurred by financial institutions worldwide amounts to 4,000 trillion won, with US and European markets alone at 2,000 trillion won.
When it comes to NPL markets of advanced countries, the barrier of entry used to be too high in the past. But, in a couple of years ahead, it is expected that opportunities will come for us to purchase high-quality assets at lower price. That might be a once-in-a-life-time chance, though.
We will do our best in actively and fully utilizing various experiences and rich networks of KAMCO, rather than neglecting them, so that KAMCO can be leading liquidity in the private sector toward more stable investment targets, thus contributing to the national wealth creation. This, I believe, is the true mission given to a public corporation.

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Interview: Mr. Richard Han, Managing Partner, Vestas Investment Management

Vestas Investment Management is a newly licensed Real Estate Fund management company authorized by the Financial Services Commission in September 2010.
In January, Vestas Investment Management announced that it has commenced capital raising for Vestas-Meritz Korea Real Estate Fund I . Vestas and its co-GP partner, Meritz Securities are participating for capital raising and fund targets country focused, core plus/value added and cyclical opportunities in the Seoul office sector. The Fund considers foreign pension fund/ fund of fund type investors with selective local pension fund investors with raising amount of USD 200~300 million.
Vestas is newly licensed Real Estate Fund management company authorized by Financial Services Commission (FSC) in September 2010. Key senior executives including Mr. Richard Han, Managing Partner, mostly joined from Macquarie Real Estate Korea (wholly owned subsidiary of Macquarie Bank) and other foreign private equity funds management company, where the team implemented global standard in investment, asset management, and divestment for past 10 years in Korea.
In an exclusive interview, Mr. Han speaks about the company and his plans for the year.

Could please you give us a background about Vestas Investment Management?
VIMC was established in 2010 and authorized by Financial Services Commission(FSC) as a licensed Real Estate Fund (“REF”) management company. Most key senior executives joined from Macquarie Real Estate Korea (a wholly owned subsidiary of Macquarie Bank) and other foreign private equity funds management companies with previous experience from several local and international groups such as JLL, Deloitte, and Daewoo.
I was managing director of both Macquarie Real Estate Korea and Ostara Korea Fund where I established a local team and built up 1.7 trillion won asset value of portfolio with current team. All transactions were high profile deals traded among major institutional investors and private equity funds such as RREEF, GE Real Estate, Lone Star, National Pension Service (NPS), and Samsung Life. Key transactions included acquisition of SK Securities, Tong-Yang Securities, and Daewoo Securities Building, Kukdong Building, ING Tower, Smart Plex, Pantech New HQ, and K1 REIT building and current team was leading the whole transactions from deal origination/execution, asset management and divestment.
Key milestones among these transactions include introducing first foreign managed CR REIT with underling asset of Kukdong building and two REIT establishment for National Pension Service where NPS invested 500 billion won of equity.
Vestas established global standard practice from previous foreign employers such as high standards of investment discipline, transparent governance, alignment of interest with investors, and reporting system. Capability to implement global standards for real estate investment and management is the key strength which would differentiate Vestas from other local fund managers.
A strong locally experienced real estate team with proven country and sector focused investment track records will be the key driver to source and execute private/off market transactions ahead of other players in the market and Vestas seek risk adjusted returns for our clients by carefully assessing potential investment opportunities and actively managing portfolios.

Where do you see the investment opportunities in Korea for 2011?
Korean real estate market is no longer an emerging market and it is now entering the stage of a stabilizing/mature market where investors should expect relatively lower return with low risk. Nevertheless, the market would look attractive to investors seeking stable yield with some capital appreciation.
We assess commercial office building sector to be still attractive (1) most liquid and (2) largest real estate holdings in a typical Korean company’s balance sheet. Some development type office take-out projects where developers having financial difficulties to continue and complete could be potential investment opportunities. Retail sectors could have opportunities where big discount store operators have an appetite for sale-lease back type divestment of existing assets for their continuous expansion requirements. Stable yield backed by quality credit of operators will provide investment opportunities.
When the market is tightening and investors have difficulty to find out attractive deals, that does not mean investors will not get attractive deals in the market. There are fund managers in the market who have hands-on experience and who have the capability to source and execute potential deals ahead of other players in the market. As long as investors assess the Korean real estate market to provide stable yield generation opportunities supported by strong fundamentals of the economy, the country should still be considered for future investment allocation.

How do you compare Korea with Japan, China, Hong Kong, Singapore? Why should foreign investors invest into Korea?
As just mentioned earlier, even when the Korean real estate market is tightening and therefore can’t enjoy high returns as was the case of 3~5 years ago, Korea still has its competitiveness compared with other Asian countries. I would like to limit my comments to the commercial office building sector.
First, fundamentals of Korean economy are strong and stable compared with other Asian countries with constant 4~5% GDP growth even after the global financial crisis. Second, many investors always consider Japan or China first in Asian Market in terms of capital allocation mainly based upon market volume with some other factors. In fact, China is still a growing market but it is also understood that investors should not ignore transparency/consistency in government policy and potential bubbles. Although all the investment environment of Japan might be more open to foreign investors and we see a lot bigger transaction volumes compared to other Asian countries, current slow economic situation would not make it easy to justify any investment commitment. In that sense, Korea has a very transparent investment environment with predictable/ stable income generating asset pools, although the target return is getting lower. Third, even though many investors are concerned about vacancies due to scheduled increasing supplies in Seoul market, this could generate buying opportunities in return as there could be pressured sellers. Historically, Seoul office market vacancy has been so low and stable and even when vacancy increases due to increasing supply, we don’t expect to see dramatically rising high vacancies like 20%~30% as some other Asian countries experienced before. In the case of total occupancy cost, Seoul grade A office still ranks lower than other major cities such as Tokyo and Hong Kong.
To conclude, I would like to say that as long as fund managers are more creative and more proactive ahead of other players based on hands-on local experience, there are good investment opportunities where superior risk-adjusted returns could be achieved. In particular, if investors are interested in stable yield generation with some capital appreciation, the Seoul office market is still attractive to investors.

Why are there only two Korean country-specific funds so far in Korea?
Although there are quite a few Pan-Asia regional type foreign managed funds, there are only two country focused private equity fund managed by foreign managers in the market. When most Pan Asia funds were raised, I understand Korea always has had relatively lower weighting in terms of capital allocation and fund managers did not have interest to launch country focused funds.
Having said that, if you look into Korean real estate market, when the market was open to foreign investors in late 1990s after the Asian financial crisis, real estate investment market grew substantially and now we see active investment grade /institutionalized transactions. In addition, based upon many transactions led by foreign investors, global standard practice is now quite common in Korea.
Even if many regional funds could still cover Korea for future investment, it could be more effective to have country focused fund managers to implement transparent and sophisticated investment management when real estate investment business anyway should be locally driven in various aspects. Many pan Asian type regional funds also happened to reduce or shut down their presence and operation in Korea recently due to restructuring after the recent financial crisis and it could be a good opportunity for investors to consider country focused funds and enter the Korean market.
In particular, when selective local fund managers now have hands-on experience with proven track record and when these fund managers can implement global standards for investment and management, we should see more private equity fund type business opportunities in Korea.

Why is Vestas trying to introduce a private equity fund business model in Korea (targeting not only foreign LPs but also local LPs) when most local fund managers just raise capital from local investors on a project basis when the deal is secured?
Many local fund managers know private equity fund business model is quite effective and competitive because fund managers can secure certain deal ahead of other players when there is committed capital from investors. Nevertheless, most local fund managers didn’t explore this type of business model for several reasons. First, local investors don’t prefer to commit in the blind pool type private equity fund and therefore local fund managers have not explored this business model with local investors. Second, most local fund managers do not have experience working with local or foreign investors in the form of private equity business model, either.
As far as local investors are concerned, it is a matter of how fund manager could give comfort to them in relation with investment decision making process when local investors are not used to giving discretion for investment decision to fund manager in the blind type fund. Vestas has some creative ideas to resolve this with potential local investors and that is why Vestas would like to challenge local investors’ commitment into private equity fund.
In addition, local investors would be more serious in this type of blind pool private equity fund if they see credible foreign LPs committed in the fund. We also understand many local institutional investors have ever increasing appetite and need to outsource their funds management to third parties as is the case in many developed countries in line with increasing demand for alternative investment (in particular real estate) allocation. Many institutional investors realize they cannot manage their portfolio in house with limited specialized professionals forever.
Vestas have built up strong global standard practice know-how to manage private equity fund business. In that sense, we are ready and open to any local or foreign potential investors for potential private equity fund management business opportunities in Korea. We should challenge more opportunities to introduce foreign investors and local investors into this type of business structure which could be mutually complementary and beneficial to local and foreign investors.

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Two Valentines Days in Korea

So yesterday was Valentine's Day....but things happened a bit differently here in Korea. If you must know, unlike in other countries, in Japan and Korea, Valentines Day is for girls to buy gifts for the guys. The guys turn falls in March, when they have to return the favor.
So there are effectively 2 Valentines Days!!! These marketing guys are really innovative. They have set aside different days for celebration, almost one a month for a variety of excuses.
As this news report points out:

Jan. 14 - Diary Day
On Diary Day, lovers and friends give one another day planners, which is symbolic of a fresh start to the year. Girlfriends also encourage boyfriends to record their special days together.
Feb. 14 - Valentine’s Day
Korea’s version of Valentine’s Day was imported from Japan after a Japanese company cleverly carved out White Day from Valentine’s to create two days in which they profited from greeting card and chocolate sales. On Valentine’s Day, it is the woman’s responsibility to buy chocolate for their significant others.
March 3 - Samgyeopsal Day
March in Korean is written as the number 3, pronounced “sam,” which is the same as the first syllable of samgyeopsal, or pork belly. Started in 2003, this is the day where people go out to eat pork belly.
March 14 - White Day
On this special day, it is men’s turn to return the favor to the women who have given them chocolate on Valentine’s Day.
April 14 - Black Day
Those who failed to be the beneficiary of love on Valentine’s Day or White Day have Black Day to fall back on. On this day, singles gather to eat jajangmyeon, which is a black noodle dish at Chinese restaurants.
Grape Day / Diary Day /Rose Day
May 14 - Rose Day
Another marketing scheme, on Rose Day lovers are supposed to present each other with a bouquet of roses, as May is the month when roses blossom. The day is promoted by florists and amusement parks, who try to lure young customers with the onset of spring.
June 14 - Kiss Day
Not related to any business, Kiss Day is pretty self explanatory.
July 14 - Silver Day
Young couples exchange silver rings - known as “promise rings” - on Silver Day. Interestingly, more couples introduce each other to their parents on this day than any other.
Aug. 8 - Grape Day
Grape Day is relatively unknown compared to other days since Nonghyup began promoting Grape Day in 2008 to raise grape sales. Also, “August” in Korean is the same as the number 8, which resembles a bunch of grapes.
Aug. 14 - Green Day
This day is designated for lovers to enjoy the beauty of nature. For those flying solo, Green Day is a day to ease loneliness by drinking soju, which is sold in a green bottle.
Sept. 9 - Googoo Day
Created by the Ministry for Food, Agriculture, Forestry and Fisheries, Googoo Day (Chicken Day) is intended to promote chicken consumption. In Korean, the sound of a chicken is “googoo,” which is the same as the pronunciation of the number 99.
Black Day /Samgyeopsal Day / Kiss Day
Sept. 14 - Photo Day
Lovers, friends and family celebrate this day by taking pictures outdoors.
Oct. 4 - Cheonsa (Angel) Day
In Korean, the number 1,004 is pronounced “cheonsa,” which sounds the same as the Korean word for “angel.” On this day, non-profit organizations encourage people to do volunteer work and make donations.
Nov. 8 - Bra Day
On Bra Day, men are supposed to buy brassieres for their girlfriend or wife. They say the numeral 11 resembles the strings on a bra, and when “8” is flipped on its side, it resembles a bra.
Nov. 11 - Pepero Day
While many of these days are altogether ignored, Pepero Day is one of the most successful (from a marketer’s standpoint). Pepero is a brand of chocolate-covered cookie first made by Lotte.
Legend has it that Pepero Day started in the 1990s among middle school girls in Busan in the hopes they would become as slim as a stick.
Nov. 14 - Movie Day
Movie Day was established by movie companies to encourage people to go to the theater.
Dec. 14. - Hug Day
This is a day when people hug one another to share the spirit of love. Its origin is unknown.

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Korean restaurant in Delhi looking for business partners

I received the following emails a while ago. An Indian hotelier plans to open a Korean restaurant in Delhi and is looking for a business partner (Korean.
The first email:

I needed your help to find a company or persons who may be interested in running a Korean Restaurant in New Delhi, India. The location is already set up as a restaurant and has some Korean kitchen equipment available in terms of kimchi fridge, bar b q tables, burners from Korea etc. Also pots and and pans are available.
The location already has a local government license to run as a restaurant and also has a liquor license available. The restaurant has seating for 45 plus a basement which already has the Korean style rooms made.
Currently in New Delhi there are 3 Korean restaurants of which only Gung the Palace is doing extremely well. Of the other two one is located in a 5 Star hotel and thereby is quite expensive and the quality is not so good. The last one has poor food quality and therefore not doing well.
My location is located near the diplomatic area and also has a huge expatriate population living in the neighbourhood; comprising of Europeans, Americans, Japanese and Koreans.
I am already running other restaurants in New Delhi and very familiar with running a restaurant. I am looking for a JV/partnership with a Korean company or person who wants to move to New Delhi for this business opportunity. The sales expected for the Korean restaurant are around Rs 35lakh - Rs 40lakh/month (USD 80,0000 - USD90,000 per month).

Another mail with details:

Let me give you a gist of the concept of the JV I envision : The Korean Partner will be responsible for ensuring the quality of the food so that it meets the authentic tastes & standards of the Korean clientele. They will also be responsible for networking in the Korean community in New Delhi to bring in business for the restaurant. There is a financial aspect of the deal as well but we can discuss that later.
My role essentially will be providing space , certain staff to manage the government required book keeping and also provide purchasing efficiencies to the partner. I will ensure compliance with all the local legal requirements needed to run the restaurant.
The restaurant will be catering to only Korean/Japanese people, other expatriates interested in eating Korean food and some Indians who may come in as guests of the Koreans who will visit the restaurant.
In terms of beef/pork , both are being imported and being sold in the Korean restaurants already present. There are also Korean supermarkets where beef is available.There is an issue with the beef but its being "managed". Soju is already available in my restaurant.
The most important issue is the ability to deliver quality food and network in the community. Even yesterday a fellow hotelier informed me that a tour company was looking for authentic Korean taste place and they have 35 groups that they can provide in a season.
My only request is that preferably I would like a person who can speak at least basic English as that really helps the dynamics and will also also make the business relationship easier.

If any Koreans are interested, do drop me an e-mail and i will give you the contact details.

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Rest in Peace

Eunmi's father has left this world for the next.
May he find happiness wherever he goes!

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Aging process of Korean women...it's true!!

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Societe de la Tour Eiffel, the first French Real Estate Investment Trust

The Societe de la Tour Eiffel is a French Real Estate Investment Trust (Société d’investissements immobiliers cotée - SIIC) based in Paris. It is the first REIT in France, beginning with 2004, and specializes in office buildings and business parks in France, and also owns warehouses, light industrial areas, and nursing home in the South of France.
European REITs first appeared in the Netherlands (1969), and then subsequently in Belgium (1995), France (2003), and the United Kingdom (2007), Germany (2007) and Italy (2007).
They each have their own unique characteristics but also share common traits due largely to the fact that they are often competing for the same investors. European REITs are generally publicly-listed vehicles with corporation structures that make long-term investments in real estate and are exempt from corporation taxation provided certain dividend requirements are met.
When, in 2003, France allowed REITs this probably was the final shoot to start the REITs-race in Europe. The listed real estate market in France has increased multi-fold since then and further growth is expected.
In a sense therefore , the Societe de la Tour Eiffel, the first French Real Estate Investment Trust (SIIC) based in Paris, can be credited with pioneering this movement.
As noted by Mr. Mark Inch, Chairman, Société de la Tour Eiffel, the company started out as the managers of the Eiffel Tower (Tour Eiffel), but became just a shell company after losing that concession to the Paris town authorities in 1979.
It was put up for sale by its owner, HSBC, in 2003 and bought by two investors, Mr. Inch and Mr. Robert Waterland with the backing of Soros Real Estate Investors. This is the first time that a listed company was setup and run by people from property world as against financial companies. Both Mr. Inch and Mr. Waterland are two long standing property professionals with backing of private equity and prompted by their knowledge of the US Reit industry.
Mr. Inch graduated from University of Oxford and Insitut Superieur d'Etudes Politique de Paris. He started his career in 1973 in the real estate sector working for Jean-Claude Aaron. In 1979, he joined the Banque Arabe et Internationale d’Investissement (BAII) and from 1985 to 1990 he was Executive Director of the Bank and Chairman of its real estate subsidiary. In 1990, he founded Franconor, a real estate consulting business. He then co-founded Awon Groupe in 1995. Mr. Inch is also Director of Fondation de la Societe de la Tour Eiffel and Federation des Societes Immobilieres et Foncieres and Manager of Bluebird Holding SARL, Bluebird Investissements SARL and SNC Albion, Managing Director and Chairman of Osiris Gestion de Entidades S.L.U. and Manager of Cergy La Bastide SNC and Manufacture Colbert SNC..
“We are primarily pursuing a bottom up property approach as opposed to institutional top down financial/fiscal approach of most other French property companies. The Company has a portfolio of properties located throughout France, mainly in Paris and Ile-de-France region, as well as in Lyon, Marseille, Nantes, Strasbourg, Caen and others,” he said.
The company was transformed at the outset of 2004 into a Société d’Investissement Immobilier Cotée, the first new entity under the relevant legislation promulgated in 2003. The company made an initial series of acquisitions concentrating on properties with long leases to quality tenants at modest rents.
Quoted on the Euronext Paris Exchange, the company pursues a strategy focused on the ownership and the development of quality office and business space capable of attracting a wide range of tenants in both established and emerging locations. It focuses on the acquisition and retention of high-yielding property assets, secured on long-term leases to quality tenants and has a high dividend payout policy secured from these income streams and enhanced by a selective disposal policy, he said.
Following a first capital increase of € 11 millions in December 2003, the company made a new cash call in July 2004 of € 123 millions with a € 210 million banking credit line being negotiated shortly afterwards. At the end of the year, the property portfolio stood at € 266 millions.
The first half of 2005 saw an additional € 105 millions of commitment however a quantum leap was made at the end of the year with the acquisition of Locafimo, a property company comprising 35 assets totaling 300,000 m² of floor space valued at € 285 millions.
This major transaction was partly financed by a capital increase of € 157 millions. In 2006, the company undertook a comprehensive review of its portfolio including a first disposal of non strategic assets (€45 millions of sales) whilst a move into the development area echoed increasing tenant demand for new buildings capable of providing efficient space at reasonable cost.
The company’s growth enabled a progression to continuous trading on the B compartment of Euronext in March 2006. The following June, the company was included in the European Public Real Estate Association index. In May of the same year, Tour Eiffel Asset Management , Mark Inch and Robert Waterland’s management company, was integrated as a fully owned subsidiary dedicated to the mother company’s portfolio management. End 2006, the portfolio was valued at nearly € 1 billion and extended to 622,907 m².
At the outset of 2007, the company initiated another significant transaction with the purchase of Parcoval for € 110 millions. This acquisition completed and consolidated the company’s position in the business park market notably as Parcoval was a significant co-owner in various parks alongside Locafimo which had been acquired one year earlier.
As a result of its selective disposal strategy and successful marketing of new developments, the portfolio at the end of 2007 amounted to 710 000 m², valued at € 1.2 billion of commitments.
Following 4 years of exceptional growth, the company adopted a more prudent outlook focused on maintaining cash flow through tenant retention and the concerted marketing of development projects.
This said, four modest acquisitions totaling € 40 millions were made and a 18 000 m² built-to-suite office development for Alstom was launched at Massy. Construction was also started on the 14 000 m² speculative office development in Vélizy due for delivery in 2010.
In all, some 50 000 m² of new developments were delivered, of which half was in the Parcs Eiffel, further rejuvenating the profile of the company’s portfolio. At the same time, disposals totaling € 90 millions were made and a major credit facility extended to 2013 was renegotiated with the company’s bankers. At year end, the portfolio comprised 713 323 m² for an unchanged valuation of € 1.104 billion despite the overall drop in market values.
In the wake of the worsening financial crisis in 2009, the company further concentrated
on the consolidation of its cash flow. The core portfolio demonstrated considerable resilience in the face of unfavourable market conditions whereas the new properties completed the previous year leased up satisfactorily, notably the Porte des Lilas, and the new business park deliveries at le Bourget, Marseilles and Bordeaux.
The 18 000 m² Massy Ampère office development was delivered to Altsom and some € 43 millions of asset disposals were achieved. At the end of the year, the portfolio extended to 670 103 m² valued at € 1 058 M reflecting the fact that the added value of new developments offset the effect of reduced values and asset disposals.
Following two years of recession, consolidation remains the order of the day against a background of gradual market recovery, notably in terms of capital values. The company continues to consolidate its cash flow whilst adjusting its financing to changed market perceptions.
Mr. Inch noted that while the French market is very attractive to foreign investors today, this was not the case ten years ago. While traditionally international investors have always invested in the United Kingdom, France was always a closed club.
“This started changing ten years ago and international investors started making a beeline. Three main policy changes can be credited with this. The first is the change in international lease durations, stamp duties and taxation policies,” he said
Earlier, the lease terms available to investors were 3, 6 and 9 years which proved to be restrictive. It has now been changed to 6, 9 and 12 years. In addition, the cost of doing business was very high, as the conveyancing stamp duty was 19.6 percent of each value as against one percent in UK. Today it is 5 percent in France and 4 percent in UK.
Finally, France used to tax both income and capital gains, which was a major disadvantage. , However, over the past ten years, policies have changed and France is the investors choice for the euro zone wand has even exceeded the UK market.
The commercial property market is much larger than UK at 52 million sq meters, and the occupational structure is much more diversified.
While they are two different market both UK and France are complementary, with different types of growth and income..
France has a whole lot to offer tourists and investors alike, which creates a really diverse property market. If anyone is looking for an investment opportunity in France, they will be glad to know that the possibilities are practically endless.
“It has always been an ideal location for property investors, especially. Even now, the real estate industry in France is booming despite the economic woes hovering over most of the world.”
Indeed, a stable market is hard to find these days, so it is nice to know that there are many advantages of investing in France.
“Whether you are an American, European, or Asian investor, you can potentially make good profits by investing in France. Even if you have never invested in anything before, you should be able to find a profitable investment opportunity in France” he said.

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Interview: Mr. Nicholas Wong, Principal, The Townsend Group

The Townsend Group was founded in 1983 by Mr. Terry Ahern and Mr. Kevin Lynch on the premise of providing uncompromised and unbiased real estate investment advice to institutional investors worldwide. Headquartered in Cleveland, it is the largest specialty real estate investment consulting firm in the industry.
In addition to Mr. Ahern and Mr. Lynch, the team is comprised of 52 real estate professionals, including 31 Principals, Consultants and Associates and a dedicated research initiative. Townsend provides global property investment counsel to more than 85 clients on both a discretionary and non-discretionary basis, representing real estate allocations in excess of $100 billion. Its clients include public pension funds, corporations, foundations, endowments, financial institutions and Taft-Hartley plans ranging from $300 million to over $130 billion in total plan assets.
Early this year, the company opened its first office in Asia, located in Hong Kong and appointed Mr. Nicholas Wong, former managing director Asia Pacific of ING Real Estate Select, as principal to focus on business development and investment underwriting in the region. Prior to joining ING in November 2007, he had held senior positions in real estate investment and commercial banking, as well as listed securities analysis. He has been in real estate investment and finance for 22 years with the past 16 years in Asia, having started his career in the US as an appraiser.
“We already have $3.2 billion invested in the region and will focus on business development and investment underwriting in the region. The real estate investment strategies currently available in the Asia Pacific markets are unique in their ability to bring true growth opportunities to global investors,” he said.
Townsend’s global scale and its expertise in manager selection will ensure that the company will be able to offer investors wishing to enter these markets insights into the region that would be difficult to match elsewhere, he noted.
His team is responsible for finding best in class funds/managers and undertakes terms negotiation, due diligence and subsequent investment management, as well as business development in Asia Pacific.
“The Townsend Group is an employee-owned private company. Since 1986, when we earned our first retainer client, our exclusive focus has been providing best-in-class institutional real estate consulting services. We recognized early on that real estate as an accepted institutional investment asset class would grow not only in size but also in complexity. As a result, we structured our company to be prepared for the coming changes,” he said.
Mr. Wong noted that the company began by establishing a dedicated research initiative which has been under the direction of its current Director of Research since 1989. It further broadened the breadth and depth of the team by adding the founders of two other institutional real estate consulting groups, and complementing the team with other key individuals with experience in law, finance, accounting, banking, real estate development, asset management, property management, research and academia.
As a result, Townsend has the most experienced and multi-disciplined staff in the industry. The quality, stability and depth of the team, their commitment to the development of the finest resources, capabilities in investment manager and product selection, and zealous client advocacy resulted in its consulting model being favored by the institutional plan sponsor community.
“We offer both discretionary and non-discretionary consulting services to our clients. Discretionary clients have further entrusted The Townsend Group with the increased fiduciary responsibility associated with the selection of investments subject to Townsend’s discretion without the additional process of going through the clients’ internal investment approval process. Townsend’s basic services are similar in both discretionary and non-discretionary mandates, but the primary differences typically reside in which party retains the authority for ultimate approval of investments,” he said.
In addition to the depth, stability and experience of the professional, the company offers other areas of expertise and experience relevant to clients.
“Given our extensive knowledge of and familiarity with providing consulting services to public pension funds, we are familiar with the issues facing larger public plan investors in real estate, including designing and implementing strategies across multiple sectors in the private and public markets, investing in wholly-owned properties through separate accounts, and developing investment guidelines and procedures.”
Speaking on the Korean market, he noted that Townsend has historically invested in the region and finds that it has a very attractive client base.
A couple of months ago Korea's National Pension Service, the world's fifth-largest pension fund, committed to invest $300 million in troubled real estate through Townsend Group, in a separately managed account. It primarily will focus on snapping up stakes in distressed private-equity real-estate funds and recapitalizing these funds.
The move by NPS, with more than $250 billion in assets, comes as a growing number of opportunistic investors are buying into troubled property funds in deals that give them a steady return and potentially a share in the profit when real-estate markets rebound, he said.
That aside, he finds China and Japan to be the most promising markets in the region. While China is a growth story, with a booming middle class, although Japan has a greying population, there are a lot of distressed ownership of assets in the market.
As for the challenges for the group, he said there is still a lot of uncertainty about the global economy. The company is looking at getting more risk exposure across the region.

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Interview: Mr. Edward Casal, Chief Investment Officer, Global Real Estate Multi-Manager Group, Aviva Investors

Aviva Investors is a global asset management business and a wholly-owned subsidiary of Aviva plc, the world's fifth-largest insurance group and a world leader in financial services.
The company’s real estate team, based in New York, London, Paris, Frankfurt, Singapore and Melbourne is made up of over 170 people, of whom about 95 are investment professionals, including fund managers, asset managers, strategists, researchers and property finance experts.
It currently manage global real estate assets in excess of of $33 billion and already has extensive holdings in Europe as well as a growing presence in North America and the Asia-Pacific region. Of this, more than $6 billion has been invested through multi-manager strategies making it one of the largest global real estate multi-manager investors.
As noted by Mr. Edward Casal, Chief Investment Officer, Global Real Estate Multi-Manager Group, Aviva Investors, the company has been highly active over the past few years, expanding its range of funds and widening the client base.
“We have invested worldwide and on behalf of leading corporations, public pension funds, and other institutional clients, building one of the longest track records in the industry. We seek superior risk-adjusted returns for our clients by creating broadly diversified and actively managed private real estate portfolios,” he said.
Mr. Casal has spent over 20 years undertaking real estate transactions on behalf of institutional investors, industrial corporations and REITs while working at Goldman, Sachs & Co., Dillon, Read & Co, and UBS. In total, he has originated and executed in excess of $20 billion of real estate transactions including both entity-level and real estate property-level transactions. Immediately prior to joining Aviva Investors, he served as Chief Executive Officer of Madison Harbor Capital, a real estate multi-manager firm he co-founded in 2003.
He is a member of the Urban Land Institute, the International Council of Shopping Centers and the Pension Real Estate Association. He is also Chairman of Madison Harbor Balanced Strategies, Inc., an SEC-Registered real estate fund of funds.
Mr. Casal noted that his current team is one of the largest dedicated real estate multi-manager groups in the industry with investment professionals based in New York, London and Singapore.
“We provide local market expertise and manage relationships throughout Asia, Europe, and the Americas. Our global investment committee, comprised of members from each region, assures consistency in the approach and execution of our strategy.”
The real estate team is based in London, Paris, Singapore, Dublin, Frankfurt and New York. The global team is made up of 180 people, including 90 investment professionals, including fund managers, asset managers, strategists, researchers and property finance experts. Mr. Casal’s team is one of the largest dedicated real estate multi-manager groups in the industry with investment professionals based in New York, London and Singapore.
The group has a comprehensive range of products and services, offering real estate investors a unique combination of strengths: significant scale, impressive people, a comprehensive product range, excellent service and an outstanding reputation for innovation.
For institutional clients of scale, the group has created segregated portfolios by investing in a range of real estate ventures. These portfolios are customized reflecting the client’s individual objectives with respect to risk and return, geographic sector allocations and cash flow requirements.
“Aviva Investors has extensive capabilities with commingled investment vehicles. We seek to design portfolios with the core objective of consistently achieving superior risk-adjusted returns for our investors on a highly diversified basis,” he said.
Based on their view of the appropriate strategies for economic conditions, the group seeks to invest in newly-formed real estate ventures sponsored by managers with strong trace records that our experience and research suggest are best-suited to achieve our goals.
“Further, we seek to design a portfolio that ensures appropriate diversification with respect to geography, strategy, manager, property and asset type, capital structure, duration and asset lifecycle,” he said.
Aviva Investors is also a discreet and fast moving buyer of secondary interests in private equity real estate. The team looks at opportunities of all types and in all locations across Europe, the Americas and Asia.
Mr. Casal also noted that the private equity real estate secondary market offers opportunities to acquire specified assets that are well advanced in the investment program. A secondary transaction involves the purchase of one or more limited partnerships or similar interests from the original investor, providing that investor with liquidity.
Speaking on the main challenges, he said that while global growth is rebounding from the depths of the financial crisis, uncertainty regarding the medium-term direction of the global economy is significant, as the fiscal imbalances remain unresolved.
“We continue to structure investment portfolios with the underlying assumption that the developed economies will fluctuate as deleveraging pressures in both the private and government sectors create strong headwinds against relatively strong business financial
conditions. Therefore, relatively conservative investment strategies are warranted. The emerging markets have shown very strong recoveries, but we have to be cautious due to the risk of overheating.”
Accordingly, he said that real estate investing activity in the developed world should remain tilted toward defensive strategies rather than aggressive growth oriented objectives. Even within
emerging markets, growth expectations must be undertaken only with a rigorous value exercise in order to avoid disappointing investment results due to premium pricing driven by excessive
weight of capital overwhelming thin investment markets.
The real estate universe is vast and includes many assets with income-producing characteristics that reduce risk. Real estate investment should appeal strongly to investors during a prolonged period of uncertainty and risk-aversion, in particular because investment strategies can be devised to capitalize on many of real estate’s innate defensive qualities.
“Our investing strategy reflects this multi-speed view of the world, with a defensive bias. While in all markets value investing predominates, in the developed markets we continue to avoid development risk and strategies dependent on a robust consumer discretionary spending, and continue to participate in recapitalizations of real estate ownership vehicles.”
In the emerging world, growth strategies can be tolerated, particularly those that address continued urbanization and growth of middle class wealth. Nevertheless, it is imperative to remain cautious and vigilant regarding valuation bubbles in formation, he said.
Mr. Casal noted that Asia is a large opportunity for the company, having invested in the region for only 3 years now. This year, plans are to expand investments in Australia, Japan, Korea, China , Singapore, Hong Kong and India. The main client targets are cash rich- time poor investors.
“We provide local market expertise and manage relationships throughout Asia, Europe, and the Americas. Our global investment committee, comprised of members from each region, assures consistency in the approach and execution of our strategy,” he said.

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Interview: Ms. Claribel B. David, Vice President, WFTO

The World Fair Trade Organization represents Fair Traders from grassroots through to the G8 and is the authentic voice of Fair Trade, having driven the movement for 20 years. It is the only global network whose members represent the Fair Trade chain from production to sale.
The WFTO is a global authority on Fair Trade, with a vision of a world in which trade structures and practices have been transformed to work in favour of the poor and promote sustainable development and justice. Membership of the WFTO is limited to organizations that demonstrate a 100% Fair Trade commitment and apply its 10 Principles of Fair Trade. WFTO members who are monitored against these Principles are listed in the Fair Trade 100 index of world-leading Fair Trade brands, businesses and organizations.
As noted by Ms. Claribel B. David, Vice President, WFTO, the main aim of the organization is to improve the livelihoods of disadvantaged people in developing countries by linking and strengthening organizations that offer just alternatives to unfair trade structures and practices.
“Our members come together in solidarity and mutual cooperation to create an alternative and fairer way of doing business. WFTO is a global network that promotes fair trade and provides a forum for the exchange of information to help members increase benefits to producers,” she said.
She noted that Fair Trade is a trading partnership, based on dialog, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South.
“Fair Trade is a trading partnership, based on dialog, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers - especially in developing countries.”
Fair Trade organizations have a clear commitment to Fair Trade as the principal core of their mission. They, backed by consumers, are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade.
The WFTO members share the following practices: commitment to Fair Trade; transparency; ethical issues; working conditions; equal employment opportunities; concern for people; concern for environment; respect for producers’ cultural identity; and education/advocacy.
All members, reflect in their structures, a commitment to justice, fair employment, public accountability and progressive work practices. They also ensure a safe working environment that satisfied at a minimum all local statutory regulations and oppose discrimination and ensure equality of employment opportunities for both men and women who suffer from the exploitation of their labour and the effects of poverty and racial, cultural or gender bias.
In this context, she pointed out that there are different organizations working to promote fair trade practice and policy, through product certification, advocacy, campaigning and educational work.
Fairtrade describes the labelling system controlled by Fairtrade Labelling Organisations (FLO) International and national partners in different countries. The FAIRTRADE Mark appears on products that meet Fairtrade standards and come from Fairtrade producer organizations.
Product standards have so far been developed for 17 food and non‐food products, ranging from coffee, tea, sugar, cocoa, rice, and fruit to flowers, cotton and sportballs. The product standards specify the minimum price and premium as well as other product‐specific requirements.
The WFTO logo on the other hand is for organizations who demonstrate a 100% commitment to Fair Trade in all their business activities. Only monitored WFTO members are authorized to use the logo. Launched in 2004 at the World Social Forum in India, the logo shows that an organisation follows the WFTO's Principles.
The logo is not a product mark - it is used to brand organizations that are committed to 100% Fair Trade. It sets them apart from commercial as well as other Fair Trade businesses, and provides a clear signal to retailers, partners, governments and donors that their core activity is Fair Trade.
In that sense, both the WFTO logo and the FLO logo are complementary and not in competition, she said.

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