BY TIAGO AZEVEDO
A couple of hiccups aside, the Macau Property Opportunities Fund has sailed through the global financial crisis, seeing its asset value increase. The company believes its investment choices have left them well positioned. A Hong Kong listing would make sense, they say, but investors will have the final say.
Every coin has two faces. Last year the world was submerged in an international financial crisis which now seems simply an unpleasant memory.
Macau Property Opportunities Fund Limited (MPO), managed by Sniper Capital, had a small setback with the fall of their Adjusted Net Asset Value (NAV) and the reversal in the local property market, but it still stands strong.
Today MPO, which is a closed-end investment company listed on the Alternative Investment Market of the London Stock Exchange, has five assets - four in Macau and one in Zhuhai - that, on completion, will range from luxury and entry-level accommodation to retail and logistics.
According to the company's report for the period ended June 30 2008, the Total Adjusted NAV dropped from US$296 million in 2008 to US$236 million one year later.
Also, the Adjusted NAV per share fell 3.37 percent for the twelve-month period ending June 30, 2009.
However, last year didn't carry only bad news for MPO. Their interim report for the period ended December 31 shows that the company is back on track. In the second half of 2009, the report says, the Total Adjusted NAV rose to US$262 million and the Adjusted NAV per share went up 10.7 percent.
Moreover, according to this last report, the company's portfolio saw an uplift of 12 percent, to a total value of US$309 million, which six months before was US$275 million.
Taking all this into account, MPO believes it is entering the next era of growth.
Opportunistic investments
After going through the global financial crisis, Tom Ashworth, director of Sniper Capital and non-executive director of MPO, believes all the right choices have been made.
In fact, the company says progress made on the development front fits well with Macau's current economic climate, especially after the pace of growth in the territory slowed to a more sustainable level.
Ashworth says Macau has unique conditions: "First of all, it is good value. Number two it has sustainable growth factors. The central government, along with the chief executive have stated that they want to see diversification of the economy.
"But it is always going to be a leisure-orientated destination. So, the key message about Macau is the sustainability of growth," the Sniper Capital director tells Macau Business.
He adds: 'We take the view that the next 10 to 20 years it will be even more exciting. A massive infrastructure project like the light rail system is going to be implemented and the final link in the region is the bridge to Hong Kong and Zhuhai, which will ultimately link the Pearl River Delta."
Ashworth describes the fund as opportunistic: "We are not restricted to any segment, we look into all sectors, everything we do depends on whether we think we can make money for our investors.
"Back in 2006 when the fund launched it raised about US$200 million of equity from mainly European investors. We have now invested around 75 percent in live sites. And latest evaluation I think was about US$330 million of assets. So, obviously we have been generating uplift in the last three or four years," he says.
In line with expectations
Looking at all segments gives MPO the opportunity to invest in different areas. Besides the site in Zhuhai – the first acquisition in the mainland that looks into the logistics sector – the fund has four assets in Macau.
The most valuable is The Waterside in One Central, the only one that wasn't developed by MPO.
In the residential market, the fund has one site in Rua da Penha, a protected area.
"There's been a lot of planning around the project in Penha, protecting the facade. Recently, planning and demolition approval has come through to this project and we are now ready to start developing it," says Ashworth.
Another redevelopment project is in the North district, Rua do Laboratorio, overlooking the border: "It is an area at big regeneration for the Macau community," says the Sniper Capital director, adding that this project is going to be positioned as an affordable development, an entry-level, for younger people.
Architectural planning approval for this project is expected in the second quarter of this year and the estimated completion date remains late 2011.
The secret, confesses Ashworth, "is to think through who wants to live in these projects. A lot of mistakes have been made and are still being made by developers who are building in the wrong locations".
Difficult market
The MPO non-executive director thinks that Macau is a difficult market.
"You cannot simply come in here, like you can in more liquid markets in the world, and buy property. It is very, very complicated.
"It's Portuguese law, which you need a thorough understanding of, but most important you must have a local network. Without the help of a local network we would never have been able to execute our strategy. A lot of people have come into Macau and had their fingers burned because they haven't understood the risks involved," Ashworth points out.
Their fourth project is near Leal Senado and is going to be a mix-use retail space.
"Our intention is to develop that site into retail oriented space, with some food and beverage. At this stage of planning we have conceptually a restaurant on the roof with three stories of retail,” says the director.
Both Penha and Senado are heritage sites meaning working with two government departments - planning and heritage.
However, Ashworth says the projects are inline with their expectations.
"From the beginning we knew that the length of approval would be longer, so we were already expecting to wait a little more than normal,” he adds.
Hong Kong listing?
Ashworth says there is no reason to fear competition.
In the luxury market, he emphasises what The Waterside in One Central has to offer, saying it will be unique.
"All our market research over the last four years suggests that the demand for true luxury residences in Macau is definitely there. That is precisely what we are going to offer," he says.
The Sniper boss also says that MPO was not expecting a change in the policy that allows investors to obtain residence in Macau if they invest MOP 1 million.
"We understand that that was a legacy policy and at the end of the day Macau was just seeing people coming here to buy flats and leave them empty, which was unhealthy. I think it was a wise decision [to keep that policy suspended]," he says.
MPO's non-executive director says the company has thought about a Hong Kong listing but there are two basic reasons for it to be listed in London.
"One is the historic connection and. secondly, we are bringing what we consider the world's most exciting growth story to the European market.
"It is true that we are an Asian based management. It would definitely make sense to have it listed in Hong Kong. But it depends on feedback from our investors and demand from the region. But it is something that we are looking at,'' Ashworth says.