Interview: Joyce Lo, Associate Director – Head of Corporate & Investor Strategy, Sniper Capital

Sniper Capital was established in 2004 to capitalize on the many property development and investment opportunities offered by Macau’s burgeoning economy. Since then its business has grown considerably.
Today the company employs 25 dedicated professionals working on a portfolio that has expanded beyond Macau's city limits to include the Western Pearl River Region of Southern China.
Sniper Capital utlises a broad array of in-house capabilities to efficiently execute every aspect of the investment and development cycle. Its dedicated focus on research and acquisitions, project development, asset management, fund administration, capital raising and investor communications allows the company to act both independently and swiftly to maximise returns on each project.Joyce Lo, Associate Director – Head of Corporate & Investor Strategy, Sniper Capital, spoke to us about the company’s plans as well as prospects for the Macau market.

Could you give us some background of your company and your major projects?
Sniper Capital Limited is an independent property investment manager specialising in property investment and development in niche and undervalued markets. Today, the firm manages two funds – the private closed-end South China Sniper Fund (SCSF) and London Stock Exchange Main Board listed Macau Property Opportunities Fund (MPO) – with combined assets of $350 million.
MPO is an opportunistic investment fund that focuses on delivering long term returns from the investment and development of high quality properties in Macau and China’s Pearl River Delta. The portfolio properties are generally of medium to larger sizes. SCSF acquires niche, small sized properties in districts which have yet to reach their full potential, and creates value through the amalgamation, redevelopment and repositioning of these properties into retail and food and beverage outlets.
Since November 2010, Sniper Capital has begun officially marketing the Macau Sniper Fund, a $100 million private fund that adopts a strategy similar to SCSF. With over seven years of experience operating in the Macau and Southern China property markets, Sniper Capital has established a strong track record in sourcing, planning and redevelopment, including working with sensitive heritage sites and old buildings. Recently, Sniper Capital has also started leveraging its sourcing and acquisitions expertise and extensive investor reach to build an investment advisory business.
Sniper Capital’s in-house expertise covers every aspect of the investment and development cycle, including research, site acquisition, project development, asset management, investor relations and finance.
Within MPO, major portfolio residential projects include The Waterside (luxury residential leasing) – Tower Six of One Central Residences, the most prestigious residential project in Macau – and The Fountainside (low density residential development) – 42 apartments catering to middle- and upper-income locals. Other key assets include a retail development in Senado Square– located in the heart of Macau’s popular tourist and shopping district – and APAC Logistics Centre (warehousing and logistics) – close to the recently-opened Guangzhou-Zhuhai rail network and the Hong Kong-Zhuhai-Macau Bridge, currently under construction.
We have also recently entered into an agreement with a local Macau developer to sell our Rua do Laboratório project (entry level residential) for $41 million, representing a net return on investment of 84%, upon the sale completion expected in April 2011.
On the private funds side, the Group is involved in a number of non-gaming destination creation projects through the conversion of older, Portuguese-colonial style buildings into retail outlets that can be leased to attractive bars, restaurants, and niche shopping designed for the enjoyment of both locals and tourists. These new landmarks are rapidly becoming places of choice for people who want to experience the vibrancy of the new Macau as well as the rich 500-year history that the territory’s historic areas have to offer. These unique projects, which have been conceived in conjunction with Macau's dedicated Heritage Department, are in complete contrast to the cutting edge designs of the nearby casino hotel resort projects.

Why are you focusing on the Macau market and what are the investment opportunities?
The firm’s principals, Tom Ashworth and Martin Tacon were attracted to Macau’s potential after its 1999 handover from Portugal to China, and the local administration’s decision soon after to break the 40-year gaming monopoly held by Stanley Ho and allow foreign casino groups to open resorts. Once a sleepy fishing village, Macau is today by far the world’s largest gaming market, generating $25 billion in casino revenues and welcoming 25 million visitors a year.
We continue to believe that Macau remains in the early stages of a period of sustained economic growth. A new round of mega resort expansion in Cotai, coupled with ambitious infrastructure projects such as the Hong Kong-Zhuhai-Macau Bridge, PRD inter-city rail network and Macau Light Rail Transit system all point to an increasingly dynamic and rapidly growing economy. Macau remains well positioned to benefit from the opportunities that will arise as a result.
Non gaming Retail and Food & Beverage
Non-gaming currently accounts for less than 20% of Macau visitors’ expenditure. The heavy focus on Macau casino projects has left Macau with a significantly underdeveloped non-gaming entertainment and leisure market. Underscored by the government’s commitment to diversify the economy, Sniper Capital expects the proportion of non-gaming revenues to increase exponentially in the coming years. Looking at the evolution of Las Vegas – where half of visitor expenditure today is allocated to non-gaming activities – we believe there is a great deal of potential upside by focusing on non-gaming real estate in Macau.
Residential
The entry of the international casino and resorts has lifted the benchmark for an improved standard of living in Macau. There is an increasing demand for high quality housing in prime locations from both expatriates and the more affluent locals looking to upgrade. Unemployment in Macau has dropped to a historical low of 2.7% while median monthly incomes are on the rise. There are also favourable government initiatives that spur demand for affordable accommodation from first time local buyers. Macau’s residential property market – which rebounded strongly post the financial crisis – is still exhibiting good value. According to Jones Lang LaSalle, capital values for the high end residential market rose by 9.6% in 2010. The modest upturn in Macau’s residential property market, compared to Hong Kong and other regional markets, is expected to continue benefitting from powerful local drivers and high levels of affordability.
Logistics
The construction of the $11 billion Hong Kong-Zhuhai-Macau Bridge will create a critical transportation link between western and eastern Pearl River Delta (PRD). When completed in 2016, travelling time between Hong Kong and Zhuhai will be reduced to a mere 30 minutes. To capitalise on increasing opportunities arising from the rapid economic integration of the PRD region, MPO is developing APAC Logistics Centre – a state of the art warehousing and logistics facility in Zhuhai.

What are the major differences between Macau and other Asian countries?
Macau, the only gaming jurisdiction in China, has since 2006 replaced Las Vegas as the largest gaming market in the world by gaming revenues, and are now almost double that of Nevada and New Jersey combined. Figures show that one of Macau’s casino groups – SJM – has revenues that exceed those of the entire Las Vegas strip.
CLSA expects Macau’s nearest rival, Singapore, to hit gaming revenues of $6.5 billion this year, on par with that of Las Vegas, but behind Macau at $30 billion. By 2012, Singapore is expected to rake in $8.1 billion, ahead of Las Vegas at $6.8 billion but still a fraction of Macau’s forecasted $34.7 billion.
Underpinned by strong fundamentals, Macau is set to be Asia’s fastest growing economy, at an estimated growth rate of 30% in 2010. With less than 30 square kilometre of land, Macau has the highest population density at 18,835 per sq km as well as one of the highest GDP per capita of $48,000 in Asia.
Aside from outstanding economic fundamentals, Macau, the oldest European colony in East Asia and the most recently relinquished colony in the world, boasts almost 500 years of rich Portuguese heritage. The government has established an official heritage department to preserve the unique blend of Chinese & European in architecture. The fusion of these cultures is also prevalent in the cuisine and the population.
In addition, Macau is the only place in China that has freehold land, although there is not necessarily a price differential between leasehold and freehold.

What differentiates Sniper Capital from other Boutique houses?
Our independence and minimal bureaucracy make us nimble and innovative. Our culture is highly entrepreneurial which encourages lateral thinking and attracts self-driven personnel.
As our name suggests, we are highly focused on certain markets and segments. We are attracted to “below the radar” properties that are often overlooked by larger developers. Moreover, we have the technical knowledge and capability in working with heritage sites. At this point, we are the only major foreign fund manager that is established and continue to grow in Macau. We believe in having local presence with our team developing a vast network of proven and established contacts in the markets in which we are operating. This fuels our ability to source, acquire and manage quality investment opportunities with strong value propositions.
In addition, we possess excellent in-house resources to across the entire investment cycle, delivering value enhancement through planning, development, asset management and eventually through a successful exit.

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Interview: Mr. Lee Soo-won, Commissioner, Korea Intellectual Property Office

The Korean Intellectual Property Office (KIPO) has a wide range of responsibility areas, ranging from patent and trademark examinations, to administering the IP Tribunal (the first stage of invalidation actions in Korea), and launching a Special Judicial Police force last year specializing in trademark infringement enforcement actions.
Mr. Lee Soo-won has served as Commissioner of KIPO since his appointment in May 2010. Prior to his current position, he worked in the Office of the President as Secretary to the President for Economic Crisis Management.
As Commissioner of KIPO, Mr. Lee is in charge of intellectual property (IP) policies. His top priorities are to enhance the quality of patent examinations; to maximize R&D efficiency through patent strategy and open innovation; and to facilitate cooperative work-sharing with other leading IP offices.He is also endeavoring to initiate various programs of international cooperation to meet the desperate needs of the marginalized and impoverished, especially those who struggle for the basic necessities of survival.
Commissioner Lee, who brings a large amount of senior policymaking experience to the role, outlines the current policy in a number of key areas in an exclusive interview.

In recent years, KIPO has established itself firmly in the top rank of international patent offices. Could you give an indication of your priority areas for international cooperation, in particular in regards to IP5 initiatives and also KIPO's role in capacity building in developing countries?
KIPO is engaged in extensive cooperation with the other major intellectual property (IP) offices that make up the IP5 offices, namely the European Patent Office (EPO), the Japan Patent Office (JPO), the State Intellectual Property Office of the People's Republic of China (SIPO), and the United States Patent and Trademark Office (USPTO). The aim of IP5 cooperation is to raise the efficiency of patent examinations and administration through work-sharing among the five leading offices. This type of cooperation helps improve the timeliness and quality of patent examination services.
The IP5 offices are collaborating on ten foundation projects. The projects involve three working groups on patent classification, IT supported business processes, and patent examination policy. KIPO leads two of the foundation projects: the Common Training Policy Project and the Mutual Machine Translation Project. The fourth IP5 heads meeting will be held in Japan in April 2011. It will be an opportunity to check the progress of the foundation projects and to discuss plans for further cooperation in the future.
KIPO is also actively engaged in bilateral cooperation. We had more than 30 bilateral meetings with other IP offices in 2010 and broadened our exchanges with European countries. In January we had a heads meeting and discussed bilateral activities with the EPO. And in February we had another heads meeting with the Intellectual Property Office of the United Kingdom (UKIPO). At the latter meeting we discussed an ongoing mutual benchmarking exercise to enhance examination quality and productivity. I believe the project with the UKIPO is indicative of our world-class examination capabilities.
In March 2010, we signed a memorandum of understanding with the Italian Patent and Trademark Office on IP protection. And in July we began implementing a Patent Prosecution Highway (PPH) with the German Patent and Trade Mark Office. This project enables each office to conduct accelerated examinations by utilizing the examination results of the other office. KIPO is also endeavoring to strengthen cooperative ties with the Office for Harmonization in the Internal Market (OHIM). These efforts are expected to come to fruition in due course.
Once a least developed country, Korea now has the fourth largest number of patent applications. This transformation has motivated us to help developing and least developed countries (LDCs) achieve economic progress through the utilization of IP. In 2004, we established the Korea Funds-in-Trust at the World Intellectual Property Organization (WIPO) to help enhance the IP capabilities and raise IP awareness in developing countries and LDCs. To date, 69 countries have benefited from the 45 projects under this scheme.
Recently we embarked on a project to provide appropriate technology to least developed countries. We also assist developing countries to create local brands so that they can sell their quality products at adequate prices. Last year, for example, we disseminated appropriate technology to Chad to help locals produce sugarcane charcoal and dried mangoes. And we are now planning to distribute sand brick technology to Nepal. Last year we also assisted in the branding of Chadian dried mangoes and, in 2009 we helped the YMCA with the branding of East Timorese coffee that was imported and sold under the fair trade movement. This year we will collaborate with APEC on the One Village One Brand project.
One of the areas that receive a lot of attention is efforts to maintain patent quality, especially in the face of soaring global patent applications and subsequent increases in examiner workloads. Could you outline KIPO's efforts to maintain examination quality whilst keeping on top of rising application numbers?
The soaring number of patent applications means that IP offices around the world face a common challenge in terms of managing and maintaining the quality of patent examinations. As with domestic applications, KIPO is now receiving an ever-increasing number of requests from foreign enterprises for international searches under the Patent Cooperation Treaty (PCT). This trend has led to huge increases in examiner workloads.
To deal with the increasing number of applications, KIPO has developed and implemented various policies on the provision of high-quality examination services. Firstly, we have recruited additional highly qualified examiners. We have also improved our training courses on new technologies so that examiners can keep abreast of rapidly changing technologies. Moreover, we ensure the quality of our examinations by assigning skilled experts, such as directors of examination divisions and heads of examination sections, to guide and supervise the entire examination process.
The Office of the Examination Quality Assurance Officer is responsible for the overall management of the examination quality. The staff of that office evaluate and manage the quality of patent, trademark, and design examinations. They evaluate samples of examiners' work results and undertake relevant planning, diagnosis, and analysis in order to improve the overall quality of our examinations. The evaluation results help examiners avoid repeating errors and rewards are given to divisions and examiners with excellent evaluation results. The results are also included in the overall performance evaluation of each examiner.
A special team of examiners is also dedicated to ensuring the quality of PCT applications.
Trials at the Intellectual Property Tribunal is playing an important role in the resolution of IP disputes. Could you briefly explain what efforts are being made by the Intellectual Property Tribunal to improve the quality of the trials and to increase the efficiency of the trial procedures?
The Intellectual Property Tribunal, which is one of the organizations affiliated with KIPO, continually strives to ensure the quality of trials and to improve the efficiency of trial procedures. To raise the trial quality, the tribunal analyzes the grounds for the revocation of trial decisions and includes the outcome in the evaluation of trial examiners. It also provides training courses on the cases involving revocation of the trial decisions for trial examiners. Each quarter, the tribunal rewards trial examiners who have made exemplary trial decisions.
The tribunal has endeavored to have more oral proceedings and to improve the quality of those proceedings. In inter parte cases where parties are sharply opposed to each other, the tribunal conducts oral proceedings to clarify the issues and to ensure the accuracy of the relevant facts. We have also increased the number of trial courts from one to five, recruited four additional court reporters, and equipped all the trial courts with a digital deposition system. Last year the tribunal conducted 647 oral proceedings, and it expects to keep this number at an annual average of about 600.
The tribunal has produced a guide manual to standardize written trial decisions, which is accessible on our electronic trial system. The manual is expected to help trial examiners minimize the preparation time for writing trial decisions.
One major recent development in KIPO's activities has been the founding of the Special Judicial Police force, which began operations in September 2010. Can you give an overview of the role of this department, and are there any ways that the EUCCK IP Centre and its members can support KIPO in its valuable enforcement actions?
Counterfeit goods should be eradicated. They discourage investments, hinder the creation of new inventions, and have a bad effect on the economy. Prior to September 2010, there was no organization in Korea exclusively responsible for investigating and cracking down on trademark-related offenses. KIPO's crackdown activities were limited to issuing corrective warnings or taking legal action against counterfeiters.
The introduction of the Special Judicial Police Authority at KIPO in September 2010 means we are no longer a paper tiger. We can clamp down on the circulation of counterfeit goods in a more systematic and efficient manner. The new authority is the only investigatory body in Korea dedicated solely to trademark-related offenses. It endeavors to eradicate counterfeit goods through its own crackdowns and through cooperative works with other related organizations. The authority currently has offices in Seoul, Daejeon, and Busan. It has a total staff of 19.
The efforts of the Special Judicial Police Authority are focused on the online and off-line circulation of counterfeit goods. The authority has strengthened the apprehension of repeat offenders and intensified crackdowns at counterfeit hotspots. It has also enhanced cooperative ties and conducted joint crackdowns with relevant organizations, such as the Korea Customs Service, the Prosecution Service, the National Police Agency, and local governments.
The introduction of the Special Judicial Police Authority led to a tenfold increase in the number of confiscated counterfeit goods last year. Before the authority was established in September last year, the number of confiscated goods from January to August was only 2,860. By the end of the year, however, the number had soared to 28,629. This is actually a twenty times increase considering the authority had operated for only four months until then.
To more effectively crack down on counterfeit goods, we need further cooperation from trademark holders and other relevant groups. It would be helpful, for instance, if the IP Center of the EUCCK could provide the Special Judicial Police Authority with detailed information on any online and off-line distribution of counterfeit goods and offer the staff at the authority a training course on how to distinguish genuine and counterfeit goods.
Many Korean firms are now focusing on R&D investment as a route to long-term growth. In addition, Korean brands and design are becoming increasingly popular throughout Asia and the world. What efforts is KIPO making to promote innovation and creativity, in particular those of SME's?
Nowadays Korea is blessed with a world-class manufacturing industry in a variety of fields. The government and private enterprises have invested heavily in R&D to ensure this trend continues for a long time. In 2009, R&D investments in Korea constituted 3.56% of our GDP. That's the fourth highest proportion in the world.
KIPO has contributed to this state of affairs by helping enterprises protect their R&D outcomes as IP. As a result, Korean products have become increasingly popular throughout Asia and the rest of the world.
Small and medium-sized enterprises in Korea often need help in the areas of innovation and IP creation. To meet this need, our office runs 31 local IP centers to encourage them to create their own IP. The centers offer consultations on patent management as well as on brand and design strategies.

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Interview: Mr Rong Ren, Managing Director & CEO, Harvest Capital

Currently managing about $1.8 billion in five funds and generating returns of over 20% IRR, Harvest Capital Partners brings together an unparalleled cross-border and cross-disciplinary team of property investment professionals. With the backing of its majority owner, it is uniquely positioned to identify and capitalize on prime and off-market transactions in China’s dynamic property development market.
The company was named “Asia Firm of the Year” by PERE magazine in the Global PERE 2010 Awards and "Property Investor of the Year - China" by The Asset magazine in the 2010 Triple-A Investment Awards. These awards are among the most prestigious accolades for the global private equity real estate industry.
Mr Rong Ren, Managing Director & CEO, Harvest Capital, spoke to us about the company’s goals and his perspective on the Chinese property market.

Could you give us a brief background on your company?
Harvest Capital Partners is a boutique investment firm that specializes in real estate investment funds focused on Greater China. We have a solid track record in the full property investment cycle, from raising capital and developing properties to managing these assets, exiting from our investments and returning capital. We are one of the few China real estate investment managers that can say that we’ve delivered 20% IRRs for our investors since 2006.
The approach we take is based on a disciplined investment model, incorporating an absolute return, value-driven strategy, to achieve medium- to long-term capital appreciation for investors. What makes us different is our hybrid-business model, in that we not only invest capital but also get actively involved in developing and managing properties. This allows us to add significant value to our projects, which we would not be able to do if we were simply passive investors.
Our portfolio of real estate funds is focused on selected regional cities, which have a large population base, high economic growth and rapidly increasing per capita disposable income.
Based on these criteria, we invest in the Bohai Gulf Region, Yangtze River Delta, Shandong Peninsula, and the Pearl River Delta, including Hong Kong. We are committed to creating maximum value for all of our investments by providing expertise from land acquisition, project development through to asset and portfolio management.
Our investments cover a focused array of asset classes, covering residential and retail properties, office buildings, hotels and serviced apartments. Specifically, we target assets that are unique either in terms of location or where significant value can be created and enhanced through refurbishment, repositioning, development or redevelopment, thereby capitalizing on the strong demand for asset dispositions in China.
Another strong advantage we have is the full support of China Resources Group, which gives us unparalleled access to a strong network in both first and second tier cities in China, where demand is fuelled by urbanisation and strong fundamentals in a rapidly growing economy.
Our entire team is passionately committed to these principles, and we all take our fiduciary responsibilities to our LPs very seriously. Being a member of ANREV is also important as it helps us pursue best practices in the funds management industry and increase transparency for our LPs. We manage capital on behalf of others, so we understand the need to manage our investment risks carefully in order to achieve the best possible returns.

What is your investment strategy and what asset classes do you think are providing the most promising returns? What cities have the biggest upside potential?
It is sometimes misleading to think of China as one market. Depending on our investors' risk appetite, investment horizon and objectives, we look to tailor specific investment strategies for them.
For example, while there is a lot of media attention on the government’s efforts to cool down the residential market, we feel this is a good time to invest. Various developers are facing liquidity constraints because of the government measures, and we are starting to see good deal flow in the residential sector.
Based on our market read at this point in time, we are looking at:
Mid-market retail in Tier 2 and Tier 3 cities in China, which are benefiting most from the urbanization trends and supported by strong retail consumption
The affordable housing sector, which is currently being supported by governments at all levels
Selected office investments in Tier 1 and Tier 2 cities, which will benefit greatly from the increasing long term capital that is emerging in China's capital markets
Selected mixed use developments on an opportunistic basis, and
Guaranteed yield products backed by high credit quality developers.
So as you can see, the opportunities and deal flow in China remain strong and Harvest Capital is well placed to continue to offer our LPs — both foreign and local — investment opportunities that fit their risk appetite and investment objectives.

There is an on-going debate among industry experts on India versus. China. What are the major differences?
We're not qualified to comment about the opportunities in India, as our mandate and expertise is primarily in China. I'm sure both countries offer excellent opportunities as their overall demographics are quite similar.
However, based on discussions with investors, I see one key difference being the Chinese government's efficiency in planning and encouraging a sustainable investment market through clear regulation, building infrastructure that supports property investments, and establishing a market environment conducive to making a decent return.
The government coordinates its planning very well and makes it easy for investors in China to see its intentions. For example, this year's 12th five-year plan is quite clear about social development, stimulating domestic consumption, reducing the income gap, promoting environmental awareness and increasing the value of China's industries. Hence, as an investor in this market, you can anticipate what strategies are sustainable over the coming years and plan accordingly. I think that's a huge advantage.

There is a stiff competition among foreign and local fund managers try to raise capital for China. What sets you apart from other players?
The Chinese market is full of opportunities, if you know where to look. There is also plenty of room for competition, which we feel is good for the development of the market.
Harvest Capital is different from most private equity real estate players in the market as we are truly local. Being part of the China Resources Group, a State-owned Enterprise, also has its advantages. Our networks and pipeline of opportunities are genuinely deep. All of our investments are sourced off-market, and our key focus is to buy into investments at a reasonably low cost. What’s more, having an extensive footprint in the country gives us access to proprietary research and information not available to others.
As a local player, China's real estate market is not opaque to us and we are able to make informed decisions when we assess investments in different cities. Another key difference is that we have a hybrid business model with significant asset management capabilities. We're not just a financial investor.
The team at Harvest Capital is also very experienced, bringing together both local and foreign expertise within an international best practice framework.
All of these factors resonate with our investors and the industry, which I think accounts for us receiving the award from The Asset magazine and being the first Chinese firm to win Asia Firm of the Year at the Global PERE Awards.

What are the best market entry strategies as a foreign investor?
I think some investors underestimate the partnership risks in China. We advise anyone looking to invest in China to find a suitable local partner. China is still a market that requires significant local expertise, due to the general lack of transparency and the sheer geographical scale.
It remains challenging to invest directly in China but having a good local partner will help smooth over "local" issues. Even more importantly, investors should look at China as a long term investment destination.
At Harvest Capital, we try to build long-term relationships that add value to our partners in numerous ways, such as utilizing our asset management capabilities to increase returns. We can also bring our networks and relationships to the partnership, such as tenant relationships, government relationships or banking relationships. Essentially, we can act as a "bridge" between our investors and China, and our LPs can look to us to manage the local risks as best as we can, leveraging on our expertise to deliver the best possible risk adjusted returns.

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Eating Live Octopus in Korea

Check out this video...
I have not had the courage to try it out so far!!!

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