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BOJ announce plan to purchase real estate investment trusts

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Japans strongest developers stock prices jumped today upon hearing the news that the Bank of Japan will purchase real estate backed assets and real estate investment trusts them selves. Japans enormous REIT market is expected to consolidate rapidly thus leading to more robust financial vehicles and greater stability in the market as a whole.  The news yesterday that the BOJ would effectively reduce the cost of capital to zero combined with the move into the property sector today has boosted the fortunes of Japanese REIT’s.  Since the financial crisis, REIT’s and other pools of capital  have lost almost 2/3 of their value and are now seen to be trading at a discount to their current worth.  The specifics are that the BOJ will set up a $60 billion USD fund which will increase fund raising capacity and pump much needed cash into the market.  It is also expected that financially stronger vehicles will use this cash to aquire competitors and a subsequent barrage of M&A deals in the Japanese real estate market.  Mitsubishi Estate, Mitsui Fudosan and Japan Real Estate Investment all gained significant share value in the expectation that they will be able to capitalize on the infusion of capital to the Japanese real estate market.  Many analysists are also saying that this move will greatly speed up the general real estate price recovery, until now, largely financed by foreigners purchase of Japanese residential real estate, mid-sized hotels and possibly even Tokyo commercial property market although that remains to be seen.

Shares in Television Broadcast Limited Suspended

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Shares in Hong Kong’s biggest broadcast group TVB suspended. Company secretary Adrian Mak Yau Kee, by order of the TVB board annouced at 10am this morning that trading on the Hong Kong stock exchange to cease trading pending further announcements.  TVB board is compromised of executive directors Sir Run Run Shaw, Dr. Norman Leung Nai Pang, Mona Fong in addition to non-executive and independent directors.  Rumor has it that Henderson land is eyeing up the entity.

Secondary Loan Market Initiated in Shanghai

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In an effort to lower risks and help Chinese banks meet new capital requirements, the CCPC has begun allowing financial institutions to sell loans to other banks.  Dubbed the Interbank Loan Transfer System and launched in Shanghai today, it is designed to improve overall monetary policy and tighten up control in the financial sector in general.In an effort to lower risks and help Chinese banks meet new capital requirements, the CCPC has begun allowing financial institutions to sell loans to other banks.  Dubbed the Interbank Loan Transfer System and launched in Shanghai today, it is designed to improve overall monetary policy and tighten up control in the financial sector in general.Last years mountain of new loans, over 9 trillion RMB, has caused uneasiness in Beijing due to the possibility of bad loans in the real estate and infrastructure sector.Beijing has clamped down on lending by raising capital requirements for banks and by limiting the investors in second or third properties by significantly raising down payment requirements.  They also ordered most SOE out of the real estate market to stop the bidding up of prime land in first tier and second tier cities.It is estimated that over 25% of loans extended to local governments to build infrastructure projects have already turned sour and local media is filled with debates about the true extent of the problem.

Huge growth of Chinese M&A expected in 2010

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Chinese outbound investment has been unproductive to say the least until now.  The learning curve for overseas investment is fraught with difficulties legally, regulations, labor and technology.  Many nations are rightly concerned that China is trying to control world recourses.  In the case of rare earths and a possible blockade, this could be a reasonable fear.  However, overall, Chinese investments overseas are quite small.  In fact, in Australia, at the time of writing this article, Chinsese FDI contributes less than 1% to Australia’s foreign investment total.As China has focused on less developed nations with less than stable political systems, the learning curve is extremely steep. Totalitarian governments can work deals with firms investing but it does not solve this issue of how the local population views the taking of recourses. In that respect, Chinese investment in Australia is a good place to learn.  Africa and Latin America offer an environment with a higher risk/return ratio.In trading, the rules are clear.  A dispute can be taken to the WTO.  However, in FDI the rules are less clear and more subject to change.  Mergers and Acquisitions (M&A) are more political than economic at times.  Resource investments, FDI, Private Equity, M&A, private equity investment, venture capital, real estate venture capital, tax lien investing, capital management, starting a hedge fund, these are the next challenges for the China International Capital Corporation Limited – CICC in the future.

Increased competition for Mining M&A’s

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All last year we read about merger after acquisition in the mining industry.  However all the players in the market were Chinese.  Expect that to change.  Analysts expect international investors to return in force now that the financial crisis worst seems to be over.  The most agressive will probably be India and Japan.All last year we read about merger after acquisition in the mining industry.  However all the players in the market were Chinese.  Expect that to change.  Analysts expect international investors to return in force now that the financial crisis worst seems to be over.  The most agressive will probably be India and Japan.In the first quarter of 2010, there were 231 global M&As in the mining and finance sector which is about 3 times more than first quarter 2009. Completed deal volume checked in at about $12B usd.  The sudden rise in competition for M&A deals caused prices to spike and many investors to begin looking at less stable geographical locations such as South America and Africa.  South America alone saw a +189% rise in M&A deals.Expect to see potential suiters try to sweeten deals with offers of technology, and large infrastructure projects in order to sway political opinion.  Countries such as China that cannot offer the technology options that Japan can, for example, will be at a disadvantage as they can only bid up prices.  In addition many targets of mergers and acquisitions plan on raising taxes on such investments which certainly will cause mining companies further heartache.

M&A in China’s auto industry

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As with many industries in China, since the global finance crisis, the government tends to lead.  In this case, it’s pushing for consolidating China’s unruly auto makers.  There are hundreds of legally registered auto manufacturers but even more illegal ones.  Especially if you consider the massive number of electric car makers producing cars that are technically illegal in all cities except for one.  It is agreed that China requires massive consolidation in order to legistlate and monitor safety standards.To that end, the Ministry of Industry and Information Technology (MIIT) is drafting policies on mergers and acquisitions currently.  The goal is to create a legal environment that encourages large scale M&A in the Chinese auto market.  However, the Chinese governments track record in controlling local governments and, therefore, the small manufacturers, is spotty.  Small manufacturers provide jobs, taxes and gifts to local officials.  If a larger manufacturer acquires a small one, jobs will move along with it.  This is the main reason the industry is so spread out.  No one wants to let go of jobs in their district.Mergers and Acquisitions (M&A in China) is not simply win-win for owners and companies.  It’s also about win-lose for local governments.  Unless Beijing can legistlate such that makes everyone happy, it will be difficult to imagine consolidation in any industry.  Let’s wait and see what the CCPC has up it’s sleeve.

Blackstone and clean energy in China

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Blackstone is raising approximately $500 million to invest in clean energy technology in addition to raising another $740 million USD in a Chinese Yuan denominated fund.  The firm is coy about which opportunities it sees as most promising but did Jonathon Gray, Blackstone’s co-head of real estate said that it sees significant opportunities in commercial real estate.  It currently has no plans to buy back shares at today, post crisis, prices.  Blackstone is currently sitting on about $15 billion and has found the recent credit recovery more robust than they anticipated.  Therefore analysts foresee the possibility of a $10 billion buyout in the near future.

Real Estate Acquisition / Disposition

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Private Equity

Efficient Equity raises capital and provides advisory services for private equity and professional real estate sponsors.  Efficient Equity’s international relationships and expertise across a broad swath of industry sectors makes our Private Capital and Real Estate Capital Advisory team well positioned to map out and implement a global effort for our clients. Utilizing our diversified and global institutional and private investor base, Efficient Equity promises to bring you a limited number of exceptional quality sponsors on a consistent basis. Efficient Equity has been involved with several fundraising transactions including: Buyout, Venture Capital, Distressed, Hedge Funds, Real Estate, Infrastructure, and Animal Healthcare.

Our Private Capital and Real Estate Capital Advisory team will deliver timely advice leveraging our Asian experience, China industrial experience, M&A background and relationships across the globe.   Efficient Equity associates bring Asian market knowledge and proven expertise to our clients in ascertaining, valuing and negotiating the disposition or acquisition of large residential and commercial real estate backed assets.

The value and perceived value of Asian assets are directly influenced by a number of factors not the least of which is capital availability in said marketplace.  Our understanding and ability to research in real time the Asian capital markets, provides a solid mix of investment sales, both debt and equity financing and long term Asian capital market knowledge.

We take a client centered approach and offer innovative solutions based on your needs, exit strategy and long term business goals in the region.  We underwrite each investment opportunity such that market perceives in a favorable light and optimizes value to you.  We also utilize internet and other modern marketing materials with the goal of increasing the value of your investment.  Efficient Equity also provides:

  • Alternative Real Estate, Infrastructure, Raw Materials and Timber Investments
  • Appraiser Search/Selection
  • Asset Acquisition/Disposition
  • Capital Flows Research
  • Corporate Real Estate Services
  • Custom Research / Reports
  • Hold / Sell Analyses
  • Independent Fiduciary Services
  • International Investment
  • Litigation Support
  • Market Cycle Analyses
  • China / Japan Market Feasibility Studies
  • Performance Measurement / Analysis
  • Asian Property Trends
  • Real Estate Asset Allocation
  • REIT Manager Search / Selection
  • Strategic Planning Services
  • Valuation Due Diligence
  • Workout / Restructuring

Debt Advisory

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Debt Advisory

Efficient Equity debt advisory division helps clients in Shanghai, Beijing, Tokyo and Osaka on the structure and execution of investment property loan sales, equity and debt placements, arranging tailor-made non-recourse loans,  Equity Investment-Real Estate Financing, Corporate Finance-RMB Financing-Leasing, Equity Financing, Pre-IPO Finance.

Investment Banking Debt and Equity Finance

We have cultivated and maintain relationships with 500+ capital sources including insurance companies, investment banks, REITs in Japan, the US and Hong Kong, pension funds, private equity investors both Chinese and foreign.  Trust Efficient Equity to direct the successful execution of your transactions. Our origination group has over 21 years of experience sourcing, controlling and financing real estate.  Operationally, we can help you in accounting, limiting tax impact in cross border transactions and help you increase equity positons.

Our tailored solutions faciliate institutions, bankers, brokers, consultants, lawyers, senior government officials in the PRC to achieve utmost value, mitigate tax burdens, optimize cash flow, and secure the optimal capital structures.  We provide superior financial advisory services for clients that range from foreign investment banks new in Asia to Chinese government investment vehicles.

China Mergers and Acquisitions

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Valuations, Strategic Transactions in China and the Asia Region

Efficient Equity serves entrepreneurs and developers who want to raise considerable equity in order to roll out their China investment goals. We combine our extensive knowledge of the China market to help clients approach institutional and entrepreneurial pools of capital and secure an optimal investment strategy for your deal structure.

Efficient Equity will help guide you in securing capital in the Asian market in addition to meeting the demands of your investors throughout the deal process.  Using Efficient Equity’s guide, we determine your business objectives and criteria for choosing a capital partner and we give you feedback on the likelihood of Chinese interest in the plan.  We also document your investment track record and carry on our own due diligence to enable to be prepared for the actual process.  We will document your plan clearly delineating your competitive advantages and track record to propose to interested parties.  Efficient Equity will source and characterize proposals from investors, negotiate terms and documentation and enable you to adhere to evolving governance and other reporting requirements.

Efficient Equity is experienced in China related merger and acquisition (M&A) deal activity, including domestic, inbound and outbound deals.   Although recent government legislation has made it more difficult, we are committed to sourcing and valuing China inbound deals to fit your capital requirements.   In addition, we  help Chinese capitalized firms to take advantage of the relatively strong RMB, ongoing financial crisis and it’s corresponding drop in value of overseas firms to both diversify risk and increase strategic holdings across the globe.   Efficient Equity advises mergers and acquisitions in the mid-level $50-100M usd range.