The ULI Asia Pacific Summit brings together 500 decision makers from all sectors of the real estate industry, including investors,

funders, developers, advisers, planners, architects and city leaders. The summit provides the perfect forum for real estate

and land use professionals from across the region to connect, exchange best practices and collaborate.

This publication gives you a snapshot of the three-day event in Shanghai, which delivered value and results.

From Shanghai to Singapore, please join us at the 2017 ULI Asia Pacific Summit

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2 U r b a n La n D J u ly/A u g u s t 2 0 1 6 J u ly/A u g u s t 2 0 1 6 U r b a n 3

Goodwin Gaw, Simon Shen, Loh Wai Keong, Francois Trausch

A Rising tide of Asian Real Estate InvestmentMark Cooper

Chinese retail investment in overseas real estate is just beginning, with waves of capital to come as a growing middle class invests in its favored asset class, panelists said in a session at the ULI Asia Pacific Summit, held in Shanghai in June.

The capital markets–focused panel also discussed the possible emergence of Japanese institutional capital, and panel members disagreed over the merits of invest-ing in India.

“China developers are building assets for a bur-geoning middle class that has an insatiable demand for real estate,” said Goodwin Gaw, chairman of Hong Kong–based Gaw Capital Partners. “Chinese retail inves-tors see real estate as a way to save. So the developers are out there developing for the next wave of Chinese outbound investment, which will be retail money, and we’re really only seeing the very

beginning of it.“Developers are out there buying land in key gateway

cities to develop product to satisfy this demand from a growing middle class that wants to park money out-side China in cities like New York, London, Sydney, and Tokyo—cities where they also go to shop or their chil-dren go to school.”

However, he warned that the capital will ebb and flow depending on whether Chinese government officials move to restrict outbound capital because they think too much is flowing overseas. Nonetheless, the long-term trend remains for more capital to flow outside China, he said.

The weighting of China outbound activity to develop-

Goodwin Gaw, chairman of Hong Kong–based Gaw Capital Partners.

Attendees tour One Museum Place, a Hines project in the Jing An District of Shanghai.

Asia PacificPANORAMAULI’s 2016 Asia Pacific Summit, the Institute’s largest Asia Pacific meeting to date, was held in Shanghai during the middle of June. Executives, academics, and lawmakers from throughout the region gathered to discuss solutions to common land use challenges facing the most-populous cities in the world as they continue to attract new residents.

Henry Cheng, chief executive officer of Chongbang Group,

served as host committee chairman.

4 U r b a n La n D J u ly/A u g u s t 2 0 1 6 J u ly/A u g u s t 2 0 1 6 U r b a n 5

tional geography” is as important as physical or political geography, he argued.

In his latest book, Connectography: Map-ping the Future of Global Civilization, Khanna writes, “We’re accelerating into a future shaped less by countries than by connectiv-ity. Mankind has a new maxim—connectivity

is destiny—and the most connected powers, and people, will win.”

An important element of this connected future will be the growth of megacities, with populations topping 10 million. Khanna used a series of maps to illustrate where these cities are growing—in some cases across borders. For example, he asserted that “Abu-Dubai” is emerging as the cities Abu Dhabi and Dubai in the United Arab Emirates grow together.

In West Africa, a coastal urban area is grow-ing between Lagos and Benin City in Nigeria, crossing national borders and growing toward Ivory Coast. “It won’t be one city with one name,” Khanna said, but it will be a connected urban agglomeration nonetheless. In Asia,

China has a number of burgeoning megacities, such as in the Pearl River Delta, while Tokyo and Osaka in Japan are growing together.

The city is more fundamental to civilization than the nation-state, Khanna argued. “Cities are our most ancient social infrastructural fact. They are far more real than borders,” he said. “We have been living in cities for 5,000 to 6,000 years, long before the emergence of nations. Mankind is becoming a global net-worked civilization amongst these cities.”

A map of the world’s most densely populated areas demonstrated the importance of urbaniza-tion. “Urban archipelagos define humanity,” he said. “We are a coastal, urban species.”

A significant amount of future growth will take place in the approximately 50 largest megacities on the planet, which will also be more resilient to economic shocks, he predicted. Khanna noted that in the United States, New York City and Los Angeles recov-ered faster from the global financial crisis than did smaller cities.

However, Khanna argued that in a number of countries, a single city dominates to the detriment of other smaller urban areas. “Indonesia is a nation of 200 million people,

Parag Khanna

toward a globalized, Networked CivilizationThe infrastructure of globalization created by man unites us as a species more than rival nations divide us, global strategist Parag Khanna told those attending the ULI Asia Pacific Summit in Shanghai in June.

The development of megacities will charac-terize the next evolution of urbanization, said Khanna, a CNN global contributor and senior research fellow in the Centre on Asia and Glo-balisation at the Lee Kuan Yew School of Public Policy at the National University of Singapore.

He described the global network of oil pipe-lines, high-speed rail links, and telecommu-nications cables as “an exoskeleton we have been building around the planet.” This “func-

Parag Khanna, a CNN global contributor and senior research fellow at the National University of Singapore.

Attendees are encouraged to engage in the conversation during breakout forums.

“Urban archipelagos define humanity. We are a coastal, urban species.”

—parag khanna

in the market who could write a big check for $1 billion,” Loh said. “Now there are a lot more pension funds, even private equity funds which can write a multibillion-dollar check. We need to maintain price discipline and, as a long-term investor, need to look at intrinsic value and realistic projections based on eco-nomic fundamentals. We pay a lot of attention to this.”

Looking at other potential sources of Asian capital, Gaw said the “big bucket” of capital to look out for is Japanese institutional capital. However, Trausch, who spent several years in Japan with GE Real Estate, said, “The Japa-nese are very cautious, and that capital may

not materialize.”Audience members were asked in an infor-

mal poll which countries outside of Asia they would invest in over a ten-to-15-year time hori-zon. North America was overwhelmingly the preferred market, picked by 53 percent of the audience. Trausch said he was surprised to see 16 percent choosing the United Kingdom, compared with only 8 percent choosing Ger-many, despite the then-pending U.K. vote on whether to leave the European Union.

Among Asian markets, China was chosen by 46 percent of those polled, followed by Southeast Asia with 19 percent and India with 15 percent. Japan was a buy for only 7 percent of those responding.

The panel agreed that China is a prime investment location in Asia because of the

sheer scale of its market and its range of opportunities. Gaw pointed out that the West-ern financial press tends to treat China as a single market rather than appreciating that opportunities vary from city to city.

The panel split on the merits of India. Both GIC Real Estate and Hines have invested there, and Shen described the nation as having “the best demographics in the world.” Said GIC’s Loh, “It’s a tough market; it’s like China was ten to 15 years ago.”

However, Gaw said, “Democracy is India’s Achilles heel. In 1990, China and India were within 5 percent of each other in terms of GDP. Now China’s GDP is five times that of India.”

Audience member Stuart Grant, Blackstone Group’s Asia Pacific head of asset manage-ment, said India is the best-performing part of the private equity group’s portfolio.

The poll also revealed that the audience’s biggest near-term concern is the forthcoming U.S. presidential election, cited by 26 percent and considered more worrisome than a slow-down in China, with 22 percent, or a bubble in the developed real estate market, with 20 percent.

Shen said he considers the impact of tech-nology on real estate sectors to be a major challenge for the future.

MArK COOPer is editor of AsiaProperty magazine.

ers is unique among cross-border capital, said Simon Shen, senior managing director and fund manager for Hines. However, he added, “An issue for developers is that the retail capi-tal can find it hard to get out of China.”

Gaw said he understands that some devel-opers choose to get around that obstacle by selling overseas apartments to Chinese buyers in China and taking payment in ren-minbi. The developers then fund their over-seas development costs off–balance sheet.

Loh Wai Keong, managing director and co-head of Asia at GIC Real Estate, the real estate investment arm of GIC Private Limited,

Singapore’s sovereign wealth fund, noted the growth of Asian institutions, which he said will become as important to the market as U.S. and European insurance companies and pen-sion funds, spurred by growing wealth in Asia.

“If you look at Japan Post [Bank] and Japan’s GPIF [Government Pension Investment Fund], they already have $4 trillion of assets, and all they need is to allocate 2 to 3 percent to real estate, then that’s $80 [billion] to $120 billion of new capital into the sector.”

Francois Trausch, global chief executive officer of Allianz Real Estate and the panel moderator, asked how institutions such as GIC, already heavily invested in real estate, can compete with new buyers.

“In the past, there were not many players

Panel members (from left) Francois Trausch, Loh Wai Keong, Goodwin Gaw, and Simon Shen discuss Asian real estate capital flows and investment trends.

“Developers are out there buying land in key gateway cities to develop product to satisfy this demand from a growing middle class that wants to park money outside China in cities like New York, London, Sydney, and Tokyo—cities where they also go to shop or their children go to school.”

—gooDwin gaw

6 U r b a n La n D J u ly/A u g u s t 2 0 1 6 J u ly/A u g u s t 2 0 1 6 U r b a n 7

ucts, which would improve the innovation and competitiveness of Chinese industries. It also could help the nation develop a more active foreign policy, which would promote Chinese interests.

The initiative’s name echoes the historic Silk Road that connected China, then the only source of silk, with Europe.

The proposed overland Silk Road Economic Belt focuses on linking China with Europe through central Asia and Russia; with the Middle East through central Asia; and with Southeast Asia, South Asia, and the Indian Ocean.

On the other hand, the 21st Century Maritime Silk Road focuses on using Chi-nese coastal ports to link China with Europe through the South China Sea and Indian Ocean, and with the southern Pacific Ocean through the South China Sea.

However, “It’s not China going out to take advantage of everybody,” Lo said. “This has to be a world project.”

The various routes pass through 65 coun-tries with a total population of 4.4 billion, encompassing 63 percent of the world’s people but only 30 percent of the world gross

domestic product, said Lo. “So there’s a lot of upside there,” he added.

Despite the ambitious nature of the pro-gram, proposed by Chinese President Xi Jin-ping and estimated to cost $8 trillion, it “will materialize in a very rapid manner,” said Lo.

He stressed the importance of infrastructure investments along the routes. “Look at how Chinese cities have developed over the past 30 years and apply that to the Belt and Road emerging cities,” he said. “They are behind now, but with investment in infrastructure, everything else will follow.”

The initiative has been accompanied by the creation of the Asian Infrastructure Investment Bank (AIIB). The AIIB will focus on development of infrastructure and other productive sectors in Asia, including energy and power, transportation and telecommu-nications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, urban develop-ment, and logistics.

Fifty-seven nations have joined the AIIB, and Lo said membership would reach 100 by the end of this year. As well as Asian and Middle

Central and Western Asia

South Asia

Mediterranean Sea

China

Southeast Asia

This preliminary map is based on the proposed geo-economic cooperation as described in the Vision and Actions on Jointly Building the Silk Road Economic Belt and 21st-Century Maritime Silk Road document. Actual routes may differ and may also extend to encompass other territories as the project develops.

Europe

Indian Ocean

Eastern nations, European countries such as the United Kingdom, Germany, and France have joined.

Lo outlined Hong Kong’s ambition to be the center of financing for the Belt and Road Initiative. One element of this is to encourage standardization—of loan forms, for example—which would increase the efficiency of doing business across the diverse nations under the Belt and Road scheme.

“We recognize that we can’t get all these countries working together right away,” he said. “However, competing countries will be encouraged to accept standardization.”

Lo said he appreciates that not every developing nation along the Belt and Road will have suitable projects for investment, but that once the first projects are underway, the progress will encourage other nations to participate.—M.C.

but Jakarta generates most of its GDP,” he pointed out. “Worldwide, there is not enough investment in secondary cities. We need to be investing so much more in secondary cities, harnessing populations. There is currently too much dependence on one city, which increases vulnerability.”

Khanna pointed out that China and India are trying to diversify. China has said it wants to be a country of 26 megacity hubs, with all remote and peripheral areas connected to those 26

hubs. India has also designated 100 cities as key geographic and population centers, making significant investments in high-quality infrastructure so that the quality of life can improve and more people can efficiently work in those economic hubs.

Overall, the world needs to spend more on infrastructure to improve connectivity between and within cities, he said. “The greatest chal-lenge is that we are not building sufficient infrastructure to confront the volatility that we have in the climate and in the economy.”

His overarching message was positive, however, arguing that urbanization and con-nectivity promote peaceful collaboration and competition. “A city doesn’t want to conquer a country on the other side of the world. It wants to trade,” he said. “Throughout history, the great cities of the world have been open, tolerant, inclusive, and investing in their people. And, of course, that means investing in infrastructure.”

This “pax urbanica” can grow without con-flict, he concluded, because “connectivity is not a zero-sum game.”—M.C.

Vincent Lo

China’s New silk Road InitiativeChina’s “Belt and Road” development strategy must become a world initiative in order to truly succeed, says Shui On Land chairman Vincent Lo. Speaking at the ULI Asia Pacific Summit in Shanghai, Lo, who is also

chairman of the Hong Kong Trade Develop-ment Council, explained how the Belt and Road plan is intended to work and the scale of the opportunity it presents.

The Belt and Road Initiative, named for the Silk Road Economic Belt and the 21st Century Maritime Silk Road, is a development strategy launched by the Chinese government to pro-mote economic cooperation among countries along several proposed trade routes.

For Beijing, the initiative could open new markets, widening the trading and commer-cial horizons to export Chinese surplus prod-

“Look at how Chinese cities have developed over the past 30 years and apply that to the Belt and Road emerging cities. They are behind now, but with investment in infrastructure, everything else will follow.”

—VinCent Lo

rob Speyer, president and chief executive officer of Tishman Speyer, addresses the future of cities, which he believes depends on visionary mayors.

rain shrouds the view of Shanghai’s iconic towers in the Pudong District along the Huangpu river.

Vincent Lo, chairman of Shui On Group, explains the real estate implications of China’s “One Belt, One road” Initiative.

Save the date for the2017 ULI Asia Pacific Summit

June 6 – 8, 2017 | The Fullerton Hotel | Singapore

Join us for the region’s premier real estate event. Connect with the world of real estate,

engage in candid dialogues.and gain new insights in one of Asia’s most dynamic cities.

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