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(SINGAPORE) The property market in Asia is booming, but CEOs of real estate related businesses are selective about how they spend their money.

Mr Kelley: Position your asset amidst a growth story

Speaking at the Forbes Global CEO Conference session on global real estate yesterday, Grant Kelley, chief executive of Colony Capital Asia, gave an insight into why it chose to buy the venerable Raffles Hotel along with all of Raffles Holdings' hotels.

'Fundamentally, in real estate, you want to position your asset in the midst of some growth story, whether it's in Beijing because of the Olympics, in a hotel in Singapore, which is facing the strongest tourism growth in 20 years, or buying into a Japanese Reit before it goes public,' he said.

These may all be different investment principles, and not over-ridingly dependent on location. Mr Kelley added: 'Your core investment philosophy should be around the adequacy and intelligibility of timing.'

Mr Kelley also revealed that some investments are tied to the recovery of national economies. '25-30 per cent of the return can be driven by (strengthening) currency,' he added.

Also present yesterday was Liew Mun Leong, CEO and president of CapitaLand, cited as one of the 'pioneers' of Asian real estate investment trusts (Reits). On the capacity for the growth of the Reit market here, he said: 'Singapore is a small market and the pool of investible real estate that can be transfered to Reits is very small, therefore the market is in Asia as a whole. We will be on the lookout for countries where regulation permits, and properties can generate high yields when transferred into Reits.'

Asked by Forbes magazine deputy managing editor Stewart Pinkerton, who moderated the session, if Reits might be considered a 'disruptive product' as they diverted real estate investment capital, Mr Liew said Reits have actually created an 'alternative source for financing and ownership of real estate'.

Other panelists yesterday included CY Leung, chairman of DTZ Debenham Tie Leung, and James Riady, CEO of Lippo Group.

Mr Riady had a much simpler take on his group's investment strategy. 'Any time a government puts in huge infrastructure, you will see growth. That's what's happening in Dubai and China. But in China, the software is missing, whereas in Dubai, I think at least up to 90 per cent of the population are expatriates,' he said.

Mr Riady also stressed the importance of a strong government. 'We like Singapore and Hong Kong because the government controls land supply. This happens less in China.'

Investing in real estate is not without risks. DTZ's Mr Leung noted that compounded rental growth for prime office space in Hong Kong and Singapore should be about 70 per cent for the next five years and 47 per cent in Shanghai. But apart from rising interest rates, factors like the impact of measures to curb property speculation in China are uncertain. 'It depends on how local authorities implement measures as these are not very detailed,' he said.

Still, all panelists were optimistic about Asian real estate, barring what Mr Kelley refered to as 'the risk of liquidity-induced correction at some point'.

Mr Liew added: 'After the Asian crisis, central bankers are now much on top of these things. In China, they have credit management before a bubble develops. I have more confidence in how the financial industry supports the real estate industry.'