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February 22, 2010 6:13 pm
What constitutes a decent investment return in the property world? That question nags at investment committees at pension funds and institutional investors, faced with entrusting real estate groups with large slices of wealth for decades at a time.
MGPA, the property adviser majority-owned by Australia’s Macquarie Group, on Monday announced the winding-up of its first global fund and details of investment returns.
According to MGPA, the 15 global institutional investors received double their equity for backing a fund which started life in 1999 with $480m.
The fund invested across myriad property classes in Asia and Europe, with investments in Tokyo and Shanghai outperforming.
Some analysts believe that a return of two times equity is hardly outstanding given the pace of growth in Asia over the past decade.
MGPA asserts that its stable management team, a pioneer in such global property investing, helped navigate hiccups including the dotcom crash and Asia’s Sars crisis. According to MGPA, the institutions which backed the fund are happy with its returns and so also invested in the group’s two bigger funds.
Some might prefer to reserve judgment about MGPA’s record until the winding-up of these later funds, some of which have made top-of-market investments in Asia.
Jones Lang LaSalle says rental and capital values of property in Asia alone have fallen by up to half from their peaks.
This is normally a time of year when the tides regularly flood the city of Venice.
But the gloomy mood seems to be more pervasive these days and threatens to go beyond the normal seasonal tides. For Venice has been beset by a series of woes, and not just the issue of how to prevent it from sinking into obscurity.
Venice is facing a long-term economic decline. It once boasted one of Italy’s largest industrial complexes employing 40,000 people directly, not to mention the tens of thousands of additional jobs with suppliers serving the petrochemical facilities and other heavy plants belching smoke barely three miles from the city’s historic centre.
That has long been a contentious issue. How could such an industrial complex live hand in hand with a fragile and unique wonder of architecture and art? These days it is less of a problem.
For one company after another is closing down – the latest is Alcoa, threatening to shut its aluminium smelter. Today barely 8,000 people work in this industrial zone.
This issue is already dominating the election campaign for the city’s mayor next month. Reviving industrial activity and jobs as well as halting the economic, social and architectural decline of Venice will be the big challenges facing any new mayor.
Renato Brunetta, the Italian public administration minister and a Venetian, wants the job badly – so badly in fact that he has promised to raise €25bn ($34bn) over the next 10 years to revive Venice. One of his ideas is to encourage new technology industries to replace the old smokestacks in the industrial zone.
But transforming Venice’s industrial economy into a high-tech Silicon Valley will not be easy. Everybody in Europe is chasing the same dream
Then there is the question whether Mr Brunetta is taking on too much. Apparently he has no intention of giving up his ministerial post in Rome should he beat his centre-left opponent, the Venetian lawyer Giorgio Orsoni.
Apart from the time he can devote to do the two jobs efficiently, voters worry about potential conflicts of interest.
For Mr Brunetta may find himself caught in the competition between Venice and Rome to become Italy’s candidate city for the 2020 Olympic Games. This is turning into a cut-throat contest and Rome has already made it clear that Venice should back down and give the capital a clear run with the Italian Olympic Committee.
Mr Brunetta faces a dilemma. Will he support Rome or Venice? And does his €25bn investment plan hinge on winning the games for the lagoon city? He would certainly do his chances in the mayoral race no harm if he trumpeted the Venice bid as part of his campaign.
Finally, Mr Brunetta, who is leading the local polls, also has an opportunity to seize the moral high ground and the credit that goes with it at a national and international level.
He should make clear that were he to become mayor he would forgo his ministerial salary even if he keeps both jobs. This would silence his domestic critics and bolster his credibility with the international community he is keen to attract to Venice – be they top business executives or decision-making sports administrators.
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