executive impact

Hot properties

7 Comments
By Chris Betros

Buying real estate overseas has long been an attractive investment option, but it is not always easy to know how to go about it. That’s where the expertise of someone like Paul Jones can prove useful. As managing partner and director of Arena KK, Jones focuses on real estate, and in particular, Australia, which is a hot market right now.

Originally from Melbourne, Jones first came to Japan to pursue a career as a professional golfer in 1992. In 1994, he resumed his higher education and work within the golf industry in Australia, and then returned to Japan in 2001 as a consultant to help restructure distressed leisure/hospitality assets. Since then, Jones has worked for ANZ Bank, Urban Realty and a private equity fund that was set up specifically to buy golf courses. Arena was established at the beginning of 2009 to help companies expand their business in Japan and the Asia-Pacific region.

These days, Jones is concentrating his energy on Arena’s newest venture – Global Property Inc which incorporates Australian Property Inc, a real estate platform for Australian property developers to market their products. API offers Japanese and foreign clients a one-stop shop to make investing in Australian real estate stress-free. Jones and his team hold seminars, provide consulting services and arrange on-site inspection tours for investors.

Japan Today editor Chris Betros meets Jones to hear more.

What makes investing in real estate abroad so attractive for Japanese or foreigners living in Japan?

Long ago, I saw an appetite among both Japanese and foreigners living in Japan who were looking at investing in property. However, investing in domestic property is not that enticing. There are so many international real estate opportunities that are attractive to the Japanese, especially in Australia, Southeast Asia and the U.S. The yen has hit all-time highs and now is a perfect time to invest. We have access to over 5,000 pieces of inventory at 30 developments in Australia and around the world.

How do you go about it?

We created a company called Australia Property Inc, which is also known as Global Property Inc – or Kaigai Fudosan in Japanese - to present international investment opportunities in real estate to Japanese. Unlike traditional realtors, we wanted to create a resource that could help investors of all levels understand the Australian market as a start. In time, we will expand the offering of countries. Our primary account is Multiplex Living, which is Australia’s largest developer. We chose Multiplex Living as it offered the widest range of products and pricing along with strategic locations. They were acquired recently by a North American company named Brookfield, which in turn has enhanced the product offerings as well a quality of service rarely found in the real estate market these days.

How much interest is there in Japan for investing in real estate overseas?

There is more interest than ever before. We have a database of almost 10,000 clients. Of those, I would say 3,000 investors are very active, constantly wanting information. Our websites are bilingual.

It is worth mentioning that here in Japan, the financial advice, support and guidance is such that very vanilla and uninspiring investment opportunities are on offer. Our timing to launch at the start of the year was ideal as entering the market at the bottom of a cycle can only enhance your investment appreciation moving forward. The key is understanding the ways to invest in property. In many cases, we meet people who already have investments in property but are not sure how to go about either divesting, growing or enhancing the type or class of properties.

The sub prime was a result of banks not fully supporting investors and making available funds that should never have been made available. Sound advice is to always have more than what you need for both the LTV and also reserves to support adjustments that always occur.

How do you market yourselves?

Our main focus is offer a strong “relationship management” service. The purchase of a property, for many people, is the largest investment that they will ever make. It is a process that deserves careful planning and consideration. The Internet is also a space we find is growing at a very rapid pace. Our websites get a lot of traffic because we have gone to considerable time and effort to provide what we feel is the right content. We also do seminars throughout Japan that are received very well. Our seminars are focused on the data that we are able to gather and present from very reliable sources around the world.

Who comes to the seminars?

People of all ages. They may be participants around 40-45, in middle management, looking for future investments, or they could be people in their 50s considering retirement. An emerging market is couples in their early 30s, say, a young family, in which the husband or wife has an international skill set. The idea of living in Australia and raising their kids there for 4-5 years is very appealing. Instead of spending money on rent, they want to acquire assets, so that when they exit, they will have some form of gain. Then we have the international/foreign person living and working in Japan who is aware of the yen parity and wishes to exercise the strong purchasing power.

Is educating clients a big part of your job?

Yes, it is, and not just at seminars. We and our partners help buyers with sourcing, financing, legal and building management, as well as planning an exit strategy, which is very important. In each country, the exit strategy is different because of the foreign investment regulations and subsequent legal and tax structure. An example is the type of lending available. From our experience, many investors take on a facility without fully understanding the consequences of the facility. This was evident in 2008-2009 where many banks' loan-to-value ratio exceeded the swings we saw in currency loans as well as the depreciation of the asset values. Be sure to take your time on every step of the process, in particular, the financing, legal/tax structure and exit strategy of any investment.

Do you have many corporate clients?

Yes, they have a slightly more creative approach to the type of investment vehicle they wish to create and invest into. 2010 has seen the interest by pension funds and private equity increase as they look for offshore yields with the strong currency and favorable lending terms domestically.

Another example is the foreclosure market. Last year, we were approached by an American partner on the West Coast (3rd most popular location for investment from Japan) to promote this opportunity to the Japan market. Foreclosures last year were happening at such a rate that banks did not want the assets on the books and as a result put them on the market for whatever they could get. The foreclosure market became oversupplied and unregulated. So a group from Las Vegas started buying the properties prior disclosure, conducting the proper due diligence to secure quality properties and created United Exchange, a website designed for this class of real estate. Since its inception in the middle of this year, the United Exchange platform is attracting both corporate clients and individuals who wish to invest in a unique real estate sector.

Do you have many non-Japanese clients?

There is a growing interest from non-Japanese. Right now, about 80% of our clients are Japanese and 20% foreigners.

What makes Australia such an attractive property market?

Rules governing investment into Australia are changing to make it more attractive to foreign investment. It will always be a solid investment market as, culturally, Australians are key investors into the real estate market. In addition, it's worth mentioning that geographically, Australia is positioned in the region we call Asia-Pacific that contains almost 70% of the world's population. The demand from the region for Australia's climate, lifestyle, education, etc, ensure it is always going to be held in the highest of regard.

The major cities on the east coast and in particular, northern Australia, because of its strategic position to Asia, are key markets. Sydney and Melbourne have always been dynamic and strong markets, although they may be stagnant for the remainder of 2010 due to such strong growth from 2005-2009. Perth and Brisbane are worth looking at, too, as both are smaller in size but have terrific infrastructure, industry and services.

Do you travel much?

Yes, every quarter, for fact-finding, doing due diligence and building a regional network. It is very important to try and stay ahead of the trends or be fortunate from traveling to see a trend emerging. We also do property inspection tours for investors. Our next one will be early November, when we’ll take a group of 20-30 investors to Australia.

What is a typical day for you?

I start with a run between 6 and 7 a.m., then check my emails. I’m usually out the door by 8. We have an office and showroom in Ginza where I will be most mornings. In the afternoons, I meet interested parties. The seminars are generally held on Thursday evenings and Saturdays.

Do you still play golf?

Yes, my passion for the game has remained constant all this time. I play once a week, and I practice another two hours a week at the range.

For further info, visit http://www.kaigaifudosan.net/ or www.multiplexliving.com.au

© Japan Today

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7 Comments
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Where do I get information for Australians wanting to invest in Japanese property?

Moderator: You can send an email to contact@arena-kk.com

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I think most people have learned their lessons from the burst housing bubbles in the US and Europe.There was a large amount of people from UK and Ireland who bought overseas properties in places like Bulgaria,Spain etc..only to have their investments value plummet. The only place you might think about buying in would be China given their strong economy and close proximity. Is it not a bit far and expensive from Japan to keep tabs on an property all the way down under? Like in Europe the hot properties of today will be the nightmares of the future for some people.

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Rules governing investment into Australia are changing to make it more attractive to foreign investment

...and force the average working class families out into the distant outer suburbs

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The only thing to think about is the tiny issue of "water." Australia is slowly drying up, and the ozone problem is getting only worse. Employment is yet another matter. There are too many places that are selling "hot" real estate where there isn't enough water. So, they are truly HOT. Nevada, Arizona, and the American West is one such place. No sense buying a place that is cheap if the water bill will kill you. Of course, there might be places in Tasmania or such not that might be OK, but check out the neighborhood and the water before you buy any property.

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I think for now the property bubble overseas has well and truly burst, and this kind of investment is likely to be a 20 year thing with much more steady growth than we have seen over the last 20 years or so, rather than a get rich quick thing.

And with the economic uncertainty still continuing, I think I would rather invest my money in something safer that will still give me that steady growth.

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Multiplex Living apartments will not be a good investment, in my opinion. If you have experience in living in Australia and you see the placement of their sites ( as we say, out in the bush ) and the size, or lack of it in the apartments, you will appreciate this fact. As for new developments, that is unused properties, if they are "developer preapproved developments" , then non-residents of Australia may buy. But otherwise non-residents cannot get approval ( application necessary but never approved )to buy residential property. I reckon that is as much to protect non-residents who are "sold" on the idea of riches in Australian property as much as to protect the local market from those from abroad who may be prepared to buy for speculative or family purposes ( eg to try and get residency ). Buying real estate in a foreign country, and no less Australia, is clearly a case of caveat emptor - buyer beware

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Rules governing investment into Australia are changing to make it more attractive to foreign investment

I hope so because right now, foreigners can only buy new in Australia. Therefore a foreign investor will pay a premium because its new and never be able to sell it to another foreign investor.

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