Oakwood: A Serviced-Apartments Pioneer
By anticipating clients' future needs, Oakwood Worldwide has become the world's largest serviced-apartment management firm — and it is committed to rapid growth in Asia.
In 1960, a young entrepreneur named Howard Ruby and his partner started a business managing a handful of small apartment buildings in California. Soon, Ruby devised techniques to provide the best level of customer service while increasing each building's return on investment. Later, he and another partner developed several niche California developments, which catered to the diverse needs of different types of residents. From these beginnings sprung Oakwood Worldwide, the world's largest serviced-apartment management firm, which today manages more than 30,000 serviced apartments throughout North America, Asia and Europe.
Ruby is still Chairman and Chief Executive Officer of Oakwood Worldwide. In the last five decades Oakwood has taken the concepts Ruby pioneered in the 1960s — different living solutions for different niches and top-rate service — and played a leading role in the development of the modern serviced- apartment industry.
Serving Different Niches
"Oakwood has different brands for the different customer segments we provide temporary housing for," says Frank Foster, Vice President of Marketing and Sales for Oakwood Asia Pacific. "Our Oakwood Premier brand, for example, offers the highest level of service, is set in great locations and has full facilities and amenities. Our Oakwood Residence brand is more focused on families. These apartments tend to be larger, offer family-friendly amenities and are located closer to schools." Our Oakwood Apartments brand targets a client base of younger executives seeking contemporary, chic and tech-savvy accommodations.
Foster quotes that 80% of the world's top 1,000 firms have relationships with Oakwood. "As an organization, we place a big priority on understanding their needs," he says. "We work with them very closely to tailor products and services for their requirements. What's more, we try to anticipate their needs for the future."
China and India will play a major role in the future of many top firms. Recognizing the importance of these two countries to its clients, Oakwood is expanding rapidly in both.
Growth in China and India
In the fourth quarter, Oakwood will add to its three China properties when it opens an Oakwood Residence serviced apartment in Hangzhou, bringing world-class, family-friendly amenities to this key industrial city. Over the next 36 months, seven new Oakwood serviced apartments will open in China. India, already home to an Oakwood Residence (in Pune), will see three new Oakwood developments in the closing months of 2008 in Mumbai, Bangalore and Pune.
"Not only will we be in the key cities of India and China, but we're also putting a big effort in getting into the secondary cities," says Foster. "Multinationals are expanding to these secondary cities, and executives and project teams will have great need for flexible temporary housing solutions. We are, for example, the first international serviced-apartment brand to enter Hangzhou."
Aside from its serviced apartments in key commercial cities, Oakwood is also establishing two new brands: Oakwood Premier Resorts and Oakwood Resorts. Two of these resorts will open in Bali in 2011. In addition, its development team will continue working with developers throughout Asia to design serviced apartments that anticipate future needs of clients. "We've always been ahead of the curve, and we will keep listening to our clients," says Foster
Pacific Star Remains Optimistic About Asian Real Estate
Pacific Star's top analyst reckons that even though times are tough, Asian property markets have good growth potential over the long haul.
To buy or not to buy? Such is the question facing Asia's institutional property investors as the global economy weakens and financial markets continue to grapple with unprecedented turbulence. Yet 18 months ago, before the emergence of America's subprime crisis and the global credit crunch, Asian real estate appeared as if it could keep going in only one direction: upward. Today the outlook seems much less certain, yet there are predictors of long-term growth.
As Head of Research and Strategic Planning at Asian real estate investment house Pacific Star, and with 13 years of experience in Asian real estate research, Mr. Tay Kah Poh has a unique perspective on the climate for property in Asia. Speaking with Forbes in Singapore recently, he gave his views on the current market, as well as the outlook for alternative property investments:
"Times are challenging," said Tay. "The ongoing fallout in financial markets sparked by the U.S. credit crisis is a huge sentiment dampener, and will further weaken the investment climate in Asian real estate if conditions deteriorate further. At this stage, it remains to be seen to what extent government intervention will be able to shore up confidence. More broadly, Asian economies are also finally beginning to feel the impact of the pullback in global demand. With China's growth also seeing some moderation, Asian economies are likely to see slower growth in the year ahead. In addition, the economy of Japan, which is a huge component of the Asian real estate market, has also slowed a great deal. Put all this together and the backdrop is very difficult for investors."
A Giant Stumbles
In a recent report on Japan, entitled "A Giant Stumbles," Pacific Star contends that as Japan's overall economic growth grinds slowly to a halt, there is growing evidence that the current real estate cycle, on an upswing since 2005, reached its apex in mid-2008. Since mid-July, conditions seem to have deteriorated even further, and policy makers have admitted that Japan's economy might have contracted in the second quarter.
Tay expects difficult conditions in the region to remain for the next 12 to 18 months, at which point he believes conditions and sentiment could begin to turn around. Already there are encouraging signs, although a full-fledged recovery will hinge greatly on the restoration of confidence in financial markets. The recent fall in oil and commodity prices and the central banks' focus on growth, as opposed to inflation, should result in monetary easing as governments attempt to spur their economies. But while falling rates will be helpful, Tay cautions that it is difficult to predict how much effect rate cuts will have on the property market.
But there are other positive signs. During the 1997 Asian Financial Crisis, property values plunged across the region. Most countries were in a capital deficit and there was limited liquidity. Today, despite the credit woes of Western banks, there is ample liquidity in Asia waiting to be deployed. The oil boom has left the Middle East flush with cash, and Asia's sovereign wealth funds have ample capital for investment.
"There is a lot of money floating around, which is the big difference between 1997 and now," says Tay. "Once things stabilize, and this could be as far away as one or two years, there could well be a catalyst of some sort that proves to be the light at the end of the tunnel."
This means that buying opportunities could appear within the next 12 to 18 months, particularly as developers suffer a funding crisis owing to weak equity markets and tight credit. To bridge the gap between equity and debt financing, distressed debt funds are becoming popular as they allow investors to pick up debt from developers, providing the developers with much-needed financing. In return, investors can negotiate substantial dividends prior to a properties divestment. One such deal Pacific Star is looking at in North Asia offers a potential coupon of 18%.
In regard to real estate investment trusts (REITs), which have taken a beating this year, Tay sees opportunities for consolidation. A recent example of this was Singapore's Frasers Centrepoint's July purchase of a 17.7% stake in Allco REIT and 100% of Allco REIT's manager for $180 million - giving Frasers Centrepoint a foothold in the REIT business. "Rather than do it on their own, it made more sense for Frasers to buy," says Tay. "Particularly at a time when Allco's share price was well off last year's highs."
In China and India, however, Tay expects derivations of private equity to remain the investment vehicle of choice. "In places like Singapore and Hong Kong, the laws are clear and there is great transparency, making these better environments for REITS," he says. "In China and India, the rules are not so clear cut and the markets are at an earlier stage of development. That said, funding shortages mean investors can take preferred shares in projects that pay dividends. It's not pure private equity because it has dividends, but later these can be converted to normal shares, which can be sold at the initial public offering stage.
"Overall growth in Asia is still likely to remain strong, and it has a strong structural underpinning owing to the demographics of China and India. China and India will eventually take off as Japan did in the Fifties. The long-term Asian growth story is still very much intact, and this is good news for property investors."
Tay Kah Poh
Executive Vice President & Head of Research and Strategic Planning Pacific Star Group
With over 13 years of experience in real estate research, Tay leads the research and strategic planning function for Pacific Star. Tay's role provides tactical market research support to Pacific Star's business units, especially in the areas of reporting, investment underwriting and due diligence. At a strategic level, he charts the regional macroeconomic and real estate landscape and scans the environment to identify relevant industry trends so as to guide the longer-term investment, divestment and asset management decisions of the Group and its external advisory for local and regional corporate, institutional and government clients.
Luxury With Impact
As an international metropolis, Hong Kong's flourishing landscape runs no shortage of deluxe apartments. Yet it is only with the emergence of the prestigious Bel-Air development on the south side of Hong Kong Island that the word "luxury" has been explicitly defined — with impact.
The impressive Bel-Air is the flagship residential property development of Pacific Century Premium Developments (PCPD), a Hong Kong-listed company (stock code: 0432) specializing in the development and management of premium property and infrastructure projects, as well as in investment in premium-grade buildings in the Asia-Pacific region.
Being part of the $2 billion Cyberport project, comprising residential towers, modern office buildings, a shopping center and a 170-room international hotel, Bel-Air is renowned for its unparalleled lifestyle concept and has been created to offer true luxury with a holistic approach.
From grand European classic style to modern and contemporary chic, Bel-Air has made waves since the development rolled out in several phases following its debut in 2003. Bel-Air No.8 — the most significant part of the development — was designed by Foster and Partners and instantly became the talk of the town when it opened in 2007. It achieved near-sold-out status within weeks of the launch.
The distinctiveness of Bel-Air has also drawn interest from international investors. Last October, a leading financial institution from Korea bought the 104-unit Tower 6 of Bel-Air No.8 for $238 million — a testament to the value of this luxury property. By September of this year, Bel-Air had already sold more than 2,700 luxury residential units, generating revenue of close to $4.7 billion.
The overwhelming response to Bel-Air was predictable. Bel-Air has successfully established itself as a unique, high-end international luxury residence. The exclusive Bel-Air No. 8 is located along the coastline of Island South, the most exalted residential area in Hong Kong that is still only 15 minutes away from the heart of the city. Its exceptionality is also best underlined by the superb facilities and services of its upbeat and cosmopolitan clubhouse, Club Bel-Air.
Designed by renowned interior designer Hirsch Bedner Associates, the 140,000-square-foot Club Bel-Air is a world of unimaginable opulence and artistry. The Club consists of nine "sub-clubs," including the Sky Club, Fine Arts Club, Gourmet Club, Wine & Cigar Club, Dream Car Club, Yacht Club, Health & Beauty Club, Kids' Club and Entertainment Club, all with unequalled services and facilities.
With Sky Club membership, residents of Bel-Air can fly to over 50 exotic destinations around the world while enjoying the luxury and comfort of corporate jets and helicopters.
Residents can also spend leisure time in Hong Kong in style, and sailing is a perfect choice. The Yacht Club offers cruise trips to many interesting places for the enjoyment of Bel-Air residents.
Whether they are ferrying shoppers or providing a lavish transfer to the airport, the Dream Car Club's fleet of luxury and sports cars ensures that Bel-Air's residents always arrive in vogue. Its up-to-the-minute fleet of prestige cars provides variety and comfort for both driving and riding pleasure.
To unwind, residents can also treat themselves to an exclusive array of beauty and spa treatments at the Health & Beauty Club, where the 3,300-square-foot Guerlain Spa features six deluxe treatment suites, including full sea-view suites with balconies.
The Gourmet Club offers an enriching dining experience in the comfort of the clubhouse. While distinguished chefs from all over the world present their signature dishes from various cultures and disciplines, residents can relax, exchange views and take tips from master chefs. To complement the fine dining, the Wine & Cigar Club offers a host of quality international wines and cigars.
To nurture children's creativity and talents, Bel-Air Kids' Club employs professionally trained tutors from the highly acclaimed Kids' Gallery. It also works with other famous educational institutes to offer a comprehensive range of classes, from speech and drama to art and design. Bel-Air also is proud to have invited world-renowned violinist Takako Nishizaki to teach violin courses to children at Club Bel-Air.
For the sophisticated residents who like to jazz up their homes with pieces of art, Bel-Air's Fine Arts Club stocks over 300 art pieces acquired from world-famous auction houses such as Sotheby's and Christie's, international galleries, private collectors and gifted artists.