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Asia’s Richest Banker Weighs $1 Billion Real Estate Fund

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(Bloomberg) — Kotak Investment Advisors Ltd., backed by Asia’s richest banker Uday Kotak, is looking to raise about $1 billion for a new fund dedicated to investing in India’s residential real estate, according to a person familiar with the matter.

Abu Dhabi Investment Authority could chip about $500 million into the property fund, while Allianz SE could invest about $220 million, said the person, who asked not to be identified as the information is private. Kotak Investment is also in advanced talks with other investors for the fundraising, the person added.

Kotak Investment plans to complete the fundraising by the end of this year and to embark on its investment in 2023, focusing on residential property in India’s top five cities, the the person said. Deliberations are ongoing and details including size and investor lineup could still change, the person added. Representatives for ADIA, Allianz and Kotak Investment declined to comment.

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India, like many nations around the world, experienced a pandemic property boom as decade-low interest rates propelled people to buy homes and resulted in a strong rebound in house sale volumes. But the market has recently started to show signs of softening in response to nation’s central bank tightening monetary policy to tame inflation.

The Reserve Bank of India raised the key interest rate by half a percentage point to 5.9% last month — its fourth consecutive hike, taking its cumulative tightening since May to 190 basis points. House sale volumes in the largest nine cities declined 7% in the second quarter compared with the previous three months, according to online real estate analytics platform PropEquity. On an annual basis, volumes are still up 96%.

Founded in 2005 as part of Kotak Mahindra Group, Kotak Investment has raised or managed about $6.3 billion across various funds and platforms, according to its website. It set up a $590 million platform with ADIA in June that focuses on property investment. Kotak Investment has raised, managed or advised more than $2.8 billion under its real estate fund series.

Uday Kotak founded Mumbai-based Kotak Mahindra Bank, which provides commercial and investment banking, as well as insurance and brokerage services. Kotak has a net worth of about $13.9 billion as the country’s ninth-richest person, according to the Bloomberg Billionaires Index.

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Blackstone To Limit Withdrawals From $125 Billion Real Estate Fund

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Topline

Blackstone will limit investor withdrawals from its $125 billion real estate investment fund following a spike in redemption requests, according to the New York-based firm, following an announcement that it will sell its stake in two Las Vegas properties.

Key Facts

Only 0.3% of the fund’s net assets will be available for redemption in December, according to a notice sent to investors Thursday, following a surge in requests in November and October.

In October, Blackstone received $1.8 billion in redemption requests—2.7% of the net asset value—and has already received requests in November and December exceeding its quarterly limit, according to the Financial Times.

Only 43% of redemption requests from investors were fulfilled in November, totaling $1.3 billion in assets.

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Following the announcement, shares at the company fell by as much as 10%.

Blackstone will receive $1.27 billion in cash—generating about $730 million for shareholders—from Vici Properties Inc. for its 49.9% stake in the MGM Grand Las Vegas and the Mandalay Bay, two properties valued at $5.5 billion total, according to a release Thursday.

Crucial Quote

“Our business is built on performance, not fund flows, and performance is rock solid,” a Blackstone spokesperson told the Financial Times, adding the company will continue to focus on rental housing opportunities.

Big Number

$69 billion. That’s the estimated value of Blackstone’s assets across logistics facilities, apartment buildings, casinos and medical office parks. Forbes estimates the real estate firm totaling $15.5 billion in revenue through 2022.

Key Background

The Blackstone Real Estate Income Trust rose in the real estate industry with its inception in 2017, according to Bloomberg, as it quickly acquired apartments, suburban homes and dorms during a period of low interest rates. Investors have become increasingly more cautious about accumulating money in assets that are hard to trade and value while Blackstone continues to place more limits on access to its funding. Because of the two Las Vegas property sales, in addition to the earlier $5.6 billion sale of The Cosmopolitan, the firm now has access to more liquid assets, potentially allowing it to redeem more requests in the near future.

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How Sellers Should Approach The Current Vancouver Real Estate Market

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We often hear “buyer beware,” but when it comes to the up-and-down real estate market, sellers would be wise to do the same — but not too much.

Is this a good time to sell? Should I even be thinking about selling? These are questions people often have difficulty answering with confidence. But Kevin O’Toole, Vancouver-based Managing Broker at Sotheby’s International Realty Canada, sees the solutions simply.

“If you’re selling out of fear [of a market downturn], that’s not a good play,” O’Toole says. “Take a breath. Talk to your financial advisors. Talk to your realtor.”

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O’Toole — who has 15 years of experiencing in the Vancouver real estate market — says if you want to sell because you need more space, or you want to downsize, or you’re being transferred for work and need to move, then go ahead and do it, because there is a decent chance you’ll be dealing with the same market influences in the future that you’re worried about now.

When O’Toole is faced with a client who has this kind of conundrum, he says he always makes a genuine effort to listen. He asks them personal questions, such as “What do you want to achieve?” and “What are your concerns?” or “What do you think would be a better investment?”

Once clients answer, O’Toole says he will often say “tell me more.” He jokingly says it makes him feel like a psychologist, but also says that he genuinely views himself — and other realtors — not as salespeople, but as consultants. And it’s times like those we’re in today when, he says, realtors provide the most value. “Realtors deliver value when there is uncertainty,” he says.

Realtors are not biased towards buying or selling, he adds. So if after the heart-to-heart, an agent feels like selling would indeed help you achieve your goals, they’ll tell you. And if they think it’s in your best interest not to, they’ll probably tell you that as well.

Once you’ve reached the point where you’ve decided to sell, O’Toole says it’s important to again work with your realtor to set a reasonable asking price. He says in the past month or so, he’s starting to see both sellers and buyers are getting a better idea of where the market is after a series of interest rate increases, and are often coming together to work out a deal.

“For a while, sellers wanted the price that they saw in the early-spring, but are now more amenable to prices for buyers,” he says.

Looking forward, he recognizes there are a few unknowns that could potentially impact the market. Premier David Eby recently announced changes to the Province’s Strata Property Act that would allow stratas to be rented out in all strata buildings. O’Toole says that could impact the market because it could open up another possible solution for those who are selling primarily due to financial concerns.

“There can be a ton of valid, and right, reasons to sell,” O’Toole says. “But selling out of fear is one of the wrong ones.”


This article was produced in partnership with STOREYS Custom Studio.

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STOREYS Custom Studio

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Ontario’s real estate industry regulator is ineffective, Auditor-General says

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Ontario Auditor-General Bonnie Lysyk speaks during a news conference at Queen’s Park in Toronto on Dec. 4, 2019.Aaron Vincent Elkaim/The Canadian Press

Ontario’s Auditor-General says the province’s real estate regulator has been ineffective in policing the multibillion-dollar residential property industry.

In a report released on Wednesday, Auditor-General Bonnie Lysyk found the Real Estate Council of Ontario (RECO) does not adequately ensure that the industry complies with the regulations and has failed to do enough to protect consumers.

Topping the Auditor-General’s list of concerns was the fact that RECO does not fully inspect real estate brokerages on a timely basis. The Auditor-General found that 27 per cent of registered brokerages have never been fully inspected.

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As well, the Auditor-General said RECO does not have a consistent process to assess those applying to be realtors and who say they have a criminal history. The report looked at a sampling of 25 professionals who had disclosed a criminal conviction or charge and found that RECO had approved 20 of them and did not provide any documented reasoning for why it did so.

RECO was also criticized for how it deals with ethics violations in real estate transactions. The report said the average fine imposed on realtors was often below the amount of the commission they earned in a transaction, and said the fine could be viewed as a cost of doing business instead of a “sufficient deterrent to future misconduct.”

RECO said it is committed to developing a plan that will address the Auditor-General’s concerns. RECO’s response was included in the Auditor-General’s 51-page report. Under the province’s real estate act, every real estate brokerage, broker and realtor must be registered with RECO.

The Auditor-General identified a host of other shortcomings ranging from RECO’s failure to track and analyze complaints, which would help it identify and address systemic problems, to a lack of protocols to ensure that students do not cheat on virtual real estate exams.

The report said one glaring lack of enforcement occurs after RECO inspectors discover a brokerage is violating rules. The regulator rarely follows up “to confirm that the brokerage has addressed the violations,” the report said.

The report also noted that RECO does not have a process to inspect whether real estate professionals are complying with anti-money-laundering laws.

“It is probable that money laundering is occurring undetected in Ontario’s real estate market,” Ms. Lysyk said in a press release accompanying the report.

During the pandemic real estate boom, blind bidding was heavily criticized for contributing to the spike in home prices when properties sold for hundreds of thousands of dollars over the listed price.Lars Hagberg/The Canadian Press

Realtors and brokers are required to report suspicious and large cash transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), which monitors money laundering.

But over the past five years, when more than one million Ontario properties worth $760-billion were sold, hardly any transactions were reported to FINTRAC. The federal agency received no reports of large cash transactions from 2017 to 2020. Only last year, which was a record period for home sales, FINTRAC received 18 reports of large cash transactions, according to the Auditor-General.

The report recommended that RECO work with FINTRAC to share information. It also recommended that RECO update its procedures to ensure that brokerages’ reporting obligations are properly reviewed.

RECO said it had already begun to “explore opportunities” to share information and collaborate with FINTRAC.

Over all, the Auditor-General had 25 recommendations for RECO and the Ministry of Public and Business Service Delivery, which oversees the regulator. In the report, both RECO and the ministry said some of the recommendations would be addressed next year when the province’s new real estate rules go into effect.

That law includes a purported change to an opaque real estate sales tactic known as blind bidding, where competing buyers in a multiple-bid situation do not know what others are offering to pay for a home.

During the pandemic real estate boom, blind bidding was heavily criticized for contributing to the spike in home prices when properties sold for hundreds of thousands of dollars over the listed price.

The real estate industry has repeatedly defended the practice as giving homeowners choice. The new law, which comes into effect in April, includes a provision that will allow the homeowner to disclose the competing offers. However, homeowners are already allowed to sell their homes via an open auction.

The Auditor-General report recommended that RECO work with its overseeing ministry to gather data on which sellers choose an auction process.

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