LIM Advisors plans Asia property fund

By Dominic Whiting

HONG KONG (Reuters) - Lim Advisors plans to launch an Asia property fund initially worth up to $200 million and probably listed on a European exchange, according to veteran Hong Kong property analyst Peter Churchouse, who will run it.

Speaking at the Reuters Wealth Management Summit in Hong Kong on Tuesday, Churchouse said the fund was mostly aimed at European family offices and private banks keen to invest in residential development and offices in Asia's thriving property markets.

Unlike during the Asian economic boom of the mid-1990s, developers have been holding back because they were badly burnt by the 1997-98 economic crisis, Churchouse said.

So most commercial markets are undersupplied, while residential supply is just meeting demand.

"Normally at this point in an economic recovery, you'd see cranes everywhere," he said. "But there's not a city out there where you can say there's massive oversupply. Maybe only in Beijing can you argue there's a supply bubble problem."

Tokyo and Singapore offices are the most attractive in the region, while commercial markets in Southeast Asian capitals Bangkok, Kuala Lumpur and Manila are also likely to rise, said Churchouse, who now runs two property securities hedge funds.

He hoped the new fund, which could be listed on London's Alternative Investment Market or in Dublin or Luxembourg, would grow to $1 billion in three to four years from an initial US$100 million to US$200 million. A term sheet for the fund is already out, and Churchouse has been talking to seed investors.

"It will have a fairly opportunistic approach and we'll look at value-add situations," he said. "There are lots of opportunities for smaller deal sizes, in the range of US$50 million, because the big funds just can't do that."

Several giant funds have been raised this year with a strong focus on Asian property at a time when some European markets are seen as expensive and the U.S. office market is suffering from a credit squeeze stemming from the subprime crisis.

Private equity firm Blackstone Group, for example, has raised a $10 billion fund and is opening a real estate investment office in Tokyo. Morgan Stanley, which is investing in Japan, China and India, has raised $8 billion, and LaSalle Investment Managers plan to spend $15 billion in Asia in the next five years.

Lim is launching the new fund because clients of its open-ended "long-short" Alternative Asia Real Estate Fund were keen to invest in physical property.

After 16 years as a Morgan Stanley analyst, in which he earned a "property guru" tag in the Hong Kong media, Churchouse set up the hedge fund in 2004 and it now manages $150 million of assets.

Once again sporting a moustache to match his famous bushy eyebrows, Churchouse said he favored Japanese real estate investment trusts (REITs), especially after a sell-off in July and August, which hurt his funds' holdings.

"Last year was sterling, but this year hasn't been as good as I'd have liked," he said. "That's attributable to the performance in Japan."

With some REITs trading at dividend yields as high as 6 percent, while 10-year bonds are yielding 1.71 percent, Churchouse picked out DA Office Investment Corp (8976.T) and Creed Corp 8888.T as good value.