Wisconsin MBAs Travel Far to Explore Chinese Real Estate Markets

Over the winter break, ten second-year Real Estate MBAs from the Wisconsin School of Business traveled to China, following an intense itinerary through Shanghai, Hangzhou, Hong Kong, Shenzhen and Macau.  Students met with brokers, planning authorities, money managers, developers, investors, lenders, attorneys and alumni to gain first-hand insight into these growing real estate markets.  The 10-day tour included a dizzying array of company presentations, property tours and speakers. 

Students prepared for the trip by performing market research and compiling a briefing book for their peers.  Students also conducted presentations of their analysis, which focused on understanding key industry players, legal structures, the political environment and cultural differences.  Once on the ground, the students were able to visualize the enormous transformation occurring in the world’s most populous country. 

“Chinese cities are experiencing growth and development on a scale never before seen,” said Travis Carter (MBA ‘13).  “It is almost impossible to wrap your mind around it.  Shenzhen was a small fishing village inhabited by a few thousand people in 1979 and today it is a sprawling metropolis of more than 15 million people.”

Viewpoint from Hysan Place, a newly opened enclosed shopping mall and Class A office building constructed over an MTR subway station in the Causeway Bay neighborhood of Hong Kong.  The visit included a tour by the architectural firm KPF and led to a discussion on the structural and financial aspects of the building.

Students met with large international institutions such as Jones Lang LaSalle and JP Morgan, as well as, key domestic players such as China Vanke, Shui On and Zendai Properties.  The trip included an extensive tour of a notable Tishman Speyer development, The Springs, located on the outskirts of Shanghai.  The mixed-use project is being developed on a former military airfield and nears ten million square feet in total.  Students were amazed, counting 11 cranes in the sky and estimating another 7-10 cranes not visible from their vantage point.

“For someone who has never been to China, I don't think it is possible to adequately describe the size and scope of the residential projects currently being developed,” reflected Phil Natkins (MBA ‘13).  “In the U.S. these wouldn't be considered residential developments, but would be more aptly named, ‘New City Developments.’  To see it, is the only way to believe it.”

Scale model of Shanghai at the Shanghai Urban Planning Exhibition Center. The detailed 3-D model provided a bird's eye view of the city and highlighted how the development of real estate has been molded around the ever-growing metro transit system.

Now back in the United States, participants of the international study trip have to apply the knowledge gained during the trip.  The students will prepare an investment memorandum and presentation targeting potential private equity investors interested in deploying capital in a foreign market.   Students will present their proposal in a 10-15 minute presentation to their peers, instructors and faculty.

Faculty Lecturer Arif Qureshi (BS ‘94, MS ‘04) led the trip, with support from MBA alum Chris Jillings (BS ‘99, MBA ‘10).  Both Qureshi and Jillings emphasized the important role alumni and friends of the program played in making this year's trip through China an outstanding success.  Special thanks to Raymond Lo (BBA ‘75), CIC Capital Management Limited’s Founder and Fred Cooper, Senior Vice President at Toll Brothers, for providing guidance and contacts for many of the meetings in China; Sir C.K Chow Chairman of Hong Kong Stock Exchange for meeting with students about HKEx and MTR; and Xi (Ada) Chen (MBA ‘10), Wei (Isabella) Qiu (MS ‘11) and Qiujin (Jack) Li (MS ‘12) for planning networking dinners in Shanghai and Hong Kong. 

Real Estate MBAs displaying their Badger pride at Po Lin Monastery in Hong Kong.

MIPIM Asia: Macroeconomic outlook and implications

Wisconsin School of Business Dean François Ortalo-Magné is in Hong Kong this week for the annual real estate property and investment conference MIPIM Asia. He facilitated the opening keynote session today with Robert Ciemniak, global head of Thomson Reuters Real Estate Markets, and Yiping Huang, professor of economics at the China Center for Economic Research at Peking University. On Thursday, Dean Ortalo-Magné will deliver the wrap-up presentation "Where do Asian, European and American investors see opportunities in Asia today?"

Visit live.mipimworld.com for the full conference schedule and more highlights





His visit to Asia is also part of the University of Wisconsin–Madison's efforts to develop stronger ties with China. The dean will join Gilles Bousquet, dean of the Division of International Studies and vice provost for globalization, and Laurie Dennis, associate director of the Wisconsin China Initiative, for meetings in Hong Kong and Shanghai.

Also participating in MIPIM Asia is real estate faculty member Joe Walsh who also leads Wisconsin's Global Real Estate Master (GREM) program, an intensive graduate-level program which is partnered with three of the world's top business schools: HEC Paris, Hong Kong UST, and INCAE. While in Hong Kong, he is meeting local real estate industry leaders and prospective students. The Global Real Estate Master (GREM), which graduated its inaugural class in 2011, is a unique two-phase program that combines high-level instruction in economics, finance, and real estate finance at one of the partner schools with training in the principles of international real estate during a capstone semester at Wisconsin. The program is now accepting applications for the 2013 semester.

Weighing risk and reward in China at MIPIM 2011

China was the topic of one of the first panels of the day at MIPIM 2011, in a session looking at "Risk Versus Reward" in the country. Wisconsin real estate MBA students report on the discussion:

China’s strong economic growth, especially its sound performance during the global economic downturn, is driving more and more foreign investors to seek opportunities in China’s real estate market. A report from DTZ proves the point, showing that the proportion of foreign investors increased to 61% in 2010 from 29% in 2009.

However, there are risks in China’s market, including the uncertainty of government policies, a lack of high quality income properties, and the potential for competition from China’s own financial institutions which will become more important players as they explore increased economic freedom.

In addition to recognized opportunities in Tier 1 cities, the MIPIM panel opened a new window to second-tier city Chongqing, one of China’s fastest growing cities. Location, infrastructure, a solid industrial foundation, strong growth in science and technology are some of the elements creating a market with huge potential investment opportunities.

The Wisconsin School of Business is proud to partner with MIPIM World to bring you updates and developments from the show. For more coverage check in with us on www.wisconsinviewpoint.blogspot.com or follow us @UW_GraaskampCtr on Twitter.

Getting ready for MIPIM

First-year Wisconsin Real Estate MBA students will travel to Cannes, France next week to attend MIPIM. To prepare for one of the most anticipated international real estate events of the year, our students have been doing research and hearing from leading professionals in the industry on how to get the most out of the trip. In this entry in our series Meet Our Current Students, Julia Xia shares her preparations:

It’s only one week away from MIPIM - the world's premier real estate event. All of the first-year Wisconsin Real Estate MBA students are going, and we are busy getting prepared for this important event. One bit of homework that we’ve done is research current hot topics in global real estate, and then present the research to our classmates and share our findings. These topics include, but are not limited to, China’s real estate capital, the emerging real estate market in Middle East, open-ended and close-ended funds in Germany, and sovereign wealth funds.

One particularly interesting topic is the real estate capital flows from China to Europe and the U.S. (The Many Ways Chinese Capital Is Entering US Property Markets, WSJ.com (subscription), 10/12/10) Chinese capital has been very active and powerful in the global real estate market in recent years. (Chinese Investors, Lenders, Quietly Penetrate Foreign Markets, Investment & Pension Funds Europe (login required), 12/7/10) The major sources of capital are the government (sovereign wealth funds like China Investment Corp.), institutional investors and wealthy individuals. For example, $62.6 billion of Chinese investment occurred in U.S. commercial real estate during 2010. The forms of investment include equity investment, debt investment, buying property, buying real estate financial products such as loan portfolios and direct real estate development. The large amount of foreign currency reserves, the domestic inflation pressure and the appreciation potential of RMB are the major forces driving Chinese capital to invest in the global real estate market. Recently, the policy loosening capital exchange restrictions will bring more Chinese capital to the global real estate market.

Another topic I found very interesting is the real estate market in the Middle East. The region can be categorized into three types of markets: stable and more open markets such as Turkey, UAE and Qatar; markets in revolution and conflict such as Tunisia, Egypt and Libya; and government-controlled investment markets such as Saudi Arabia and Iran. Out of these markets, Turkey seems to be the most emerging and booming real estate market. Istanbul ranked as the number 1 city for economic growth in 2010. (Istanbul Favorite European City for Property, Bloomberg, 2/3/11) The economy and the employment rate increased 5.5% and 7.3% respectively in 2010, making it an attractive market for global real estate investment.

MIPIM will be great, just to get connected with the most influential real estate professionals. We are trying our best to get ready to learn, to share and to connect at the event. Hope to see you there!

Julia Xia is a first-year MBA student in the James A. Graaskamp Center for Real Estate. Formerly a real estate consultant and asset manager in Beijing, Julia graduated from Peking University with a bachelor's degree in finance and banking.

The Wisconsin Real Estate Viewpoint will be reporting from MIPIM next week! Check back for updates and key takeaways from all the sessions! You can also follow us on Twitter @UW_GraaskampCtr and on Facebook.

Also, be sure to stick around for the wrap-up keynote presentation at MIPIM on Friday March 11 at 10:00 am (local time). Prof. François Ortalo-Magné, Robert E. Wangard Chair in Real Estate, and Philippe Tannebaum, IEIF, will deliver an overview on Real Estate Investment Post-Crisis: What Have We Learned? What Next?

MIPIM Asia 2010: Keywords redevelopment and sustainability

Wisconsin Real Estate is participating in MIPIM Asia 2010 this week in Hong Kong. In the first day of the conference, keywords that have already emerged are "redevelopment" and "sustainability."

Asia as a whole offers attractive investment opportunities and returns in a global economy still in recovery. Growing urban areas in China and other countries are ripe for redevelopment to meet the needs of the 21st century with an emphasis on green building techniques and "livability."

China remains the primary magnet for capital in the region with second tier cities commanding more attention as top tier cities heat up. Other markets also attracting interest include Vietnam, Singapore and Tokyo.

The U.S. economy has not been a top topic of conversation so far. However Nobel laureate in economics Professor Joseph Stiglitz is due to deliver a morning keynote address on Thursday on his thoughts on the U.S. and global economies and the outlook for recovery.

Wisconsin Real Estate is at the show conducting a survey of conference participants' investment targets and concerns and their opinions on investment prospects over the next 2-3 years. Results of the survey will be presented by Professor Francois Ortalo-Magne at the wrap-up keynote on Friday along with Nick Axford, CBRE Hong Kong.

MIPIM 2010: 3 ways that foreign investors can enter Chinese market

Wisconsin Real Estate MBAs report from MIPIM 2010:

Tuesday March 16
Panel: China - Expansion Rhymes with Challenges

As fears of a real estate bubble approached in the last two years, the central government of China tightened rules for foreign investment in real estate and the increased proportion of domestic to foreign investors reflects that. There are currently three ways that foreign investors can enter the market: (1) through direct investment by establishing a real estate development subsidiary; (2) through the merger and acquisition of equity of an existing Chinese real estate developer; and (3) (most popular) through the merger and acquisition of real property developed by a Chinese real estate developer.

The future of commercial real estate in China looks promising for at least the next 5 to 10 years, but the Chinese government remains the biggest determinant of how that future will roll out.

For more coverage of MIPIM 2010, visit our partner CREOpoint.com.