U.S. fund managers find bargains arising
U.S. fund managers find bargains arising
SAN FRANCISCO (Dow Jones): In early July, U.S. real-estate
company Colony Capital offered to buy a just-finished upscale
residential development in the Philippines from its near-bankrupt
owners. The offer was for about US$30 million -- but the owners
rejected it.
Three weeks later, however, their South Korean bankers told
them to sell or be forced into receivership. The upshot: Colony
got the property for 10 percent-15 percent less than it
originally offered, reports the latest edition of the Far Eastern
Economic Review published yesterday.
"It wasn't the first time in Asia when our earlier offer
wasn't accepted," says John Brady, a principal of the Los
Angeles-based company, which is one of the biggest private real-
estate investors in the U.S.
As Colony's experience indicates, stricken Asian companies
have often been reluctant to sell out to foreign investors.
But now, more than a year into Asia's economic crisis,
companies in the region are finally starting to admit they need
outside help. That sea of change promises a wealth of new
opportunities for cash-rich investors from the U.S. and
elsewhere. With local sources of finance drying up, many Asian
companies need money for restructuring -- or just to survive.
The openings for investment are better now than even a few
months ago, according to U.S.-based private investors who are
poised to reap potentially huge benefits. Asia's cash crunch has
forced sellers to accept deals they might recently have rejected.
Combined with a revival of U.S. institutional interest in the
region, this has led to a surge of new U.S. funds aimed at Asia.
This is the moment that many investors have been waiting for,"
says Simon Murray, a long-time Asia hand. In July, Murray raised
$150 million for the first offering of his Asia-targeted Gems
fund, with U.S.-based GE Capital leading a pool of international
investors.
One obvious attraction to private investors now is lower
prices. Many would-be investors stayed on the sidelines of Asia's
mid-1990s boom because prices relative to earnings were simply
too high.
The region's economic crisis, and the slide in prices it has
triggered, has now given them their chance.
"Prices are now 50 percent cheaper than they were a year ago
and the deals just keep getting better," says Murray, who hopes
to double the size of his fund by year's end. Adds Hsu Ta-lin,
chairman of Asia operations for Hambrecht & Quist (HQ), a San
Francisco-based investment bank: "They need the liquidity and we
have the capital. It's a perfect match."
The near-disappearance of local capital has also given outside
investors an entree to a whole new set of deals. "Access is the
hardest part of finding deals in Asia," says Brady of Colony
Capital.
"Now we are seeing that situation improve." Eric Li, a partner
in the San Francisco-based venture-capital firm Orchid Asia
Holdings, recalls that before the crisis, the best deals went to
the region's own, more aggressive financiers.
"Companies in Asia were playing one investor off against
another. We couldn't even get a seat at the table." That has all
changed now, he says.
A rash of new private-investment funds provides evidence of
U.S. money-holders' heightened interest in Asia. They include
several "vulture funds," so called for their hungry swoops on the
distressed real estate that litters Asia's business landscape.
Among them are an $800 million fund launched recently by
Houston-based developer Hines, which intends to invest more than
40 percent in Asia. New York-based Greenwich Group International
expects to raise $2 billion-2.5 billion from U.S. investors for
Asian property purchases by the end of 1999.
"The response from investors has been overwhelmingly
positive," says Hsu of Hambrecht & Quist, which already has $700
million invested in Asia and expects by year-end to establish a
new fund for the region worth at least $500 million. "From an
investment perspective, the Asian crisis has become a great
opportunity."