Eight former Lend Lease executives bought out their parent company, Lend Lease Global Properties, in February. At that time, the investment fund had $1.6 billion under management. As a result of the buyout, the portfolio came under the management of Ochtar Capital, a private equity real estate investment firm with offices in Luxembourg, Belgium, Germany, Japan, South Korea and Hong Kong. More than 80% of the fund consists of office properties, half of which are located in Great Britain. Institutional investors including pension funds and insurers from the U.S., Europe, Middle East and Australia have invested in Ochtar's fund.
London-based Andrew Wood was principal of Lend Lease Real Estate Investments. He established Lend Lease Global Properties group in 1999, spearheading strategic planning, capital raising and portfolio management. Under Wood's stewardship as COO, Ochtar will launch a new fund later this year designed to yield investors returns in excess of 20% through a combination of both European and Asian real estate investments. NREI talked with Wood to gain more insight into the fund of global assets that Ochtar now manages.
NREI: How will your new real estate fund be structured?
Wood: It will be similar to the first fund with $520 million in equity. We believe this is the right size to allow diversification while being able to pursue larger transactions. It will focus on markets where the yield price of an investment is overpriced, along with markets where a capital shortage has forced prices down.
NREI: Where are the growth opportunities today in the emerging markets?
Wood: China is a key market. But it's relatively difficult for investors like us because it lacks a legal structure and a proven exit strategy. We're monitoring China closely, and in the next few years I expect to make an investment there. In Russia, for example, it's very difficult to see what the legal structure is, and there's a similar problem with liquidity. These are very immature markets.
NREI: The wrong partners can spell disaster. How important is it to have a dedicated office in these foreign markets?
Wood: Because of the culture it's very important to have someone there who really understands what's going on in the market. We have a small office in Tokyo, for example. The laws heavily favor tenants in Japan, so you need to know exactly how to proceed when you raise rents. We have our own feel for where we see the market going and how rental increases will be translated into income increases.
NREI: Where is your strongest market today?
Wood: You might see some significant rent increases in Hong Kong over the next 18 months. Even in Tokyo, we are beginning to see some rental increases, but I feel those will be pretty subdued.
NREI: And, by comparison, the weakest?
Wood: Germany is the weakest market at the moment. It's very difficult to see from where growth will emerge, and the economy continues to be sluggish. There continues to be limited demand.
NREI: What's Ochtar's strategy for the remainder of 2004?
Wood: We're focused broadly on selling in Europe and potentially buying in Asia. I think there are some deals to be had in Asia today. We're doing very limited development today. It will never be more than 20% of the portfolio. Some of the opportunities in Asia will likely be development-oriented.
NREI: How did you arrive at the name “Ochtar” for your firm?
Wood: It's a Gaelic term for “eight people.” There were eight principals when we bought out management, but nine principals now run the firm.