Global Real Estate Investment Opportunities

By M. Isi Eromosele

Despite recent price turbulence in many developed world real estate markets, global real estate as an asset class continues to offer long-term institutional investors several important benefits: portfolio diversification through low correlations to other asset classes, solid cash flows and a measure of inflation protection through index-linked rents.

Investing in real estate across the world enhances this diversification by allowing investors to choose among the strengths and weaknesses of local property markets as they evolve.

There are many ways to design exposure to global real estate depending on risk and return preferences. Investors can choose opportunities in real estate equity or real estate debt. Within each of those asset classes, there are multiple segments, each with its own advantages and disadvantages.

Global Real Estate

Investing within and across regions can offer varied sources of returns, providing additional diversification to a portfolio. Real estate is ultimately a local business, with cash flows linked to the physical assets and influenced by local economic conditions.

Thus, the timing and nature of real estate returns can be very varied, depending on prevailing conditions in countries and regions.

Investing in real estate globally allows investors to take advantage of region-specific opportunities. They can seek stable value investments in developed markets such as the United States, the United Kingdom, continental Europe, Canada and Australia.

Alternatively, they can target emerging markets with high growth potential such as China and Brazil. Investors need to be aware, though, that going overseas involves risks, including a potential lack of transparency in many markets.

While the real estate markets of the U.S. and U.K. are some of the most transparent, with price discovery and market data among the best, corporate governance and reporting standards vary considerably around the world.

Apart from interest rate fluctuations and inflation risk, another potential problem for global real estate investors is the difficulty of identifying appropriate benchmarks for performance. It can also be more challenging to monitor and evaluate investments from a distance.

Investing abroad is also likely to incur higher transaction costs and there is the potential for exposure to foreign exchange risk. Another significant consideration in a globally diversified portfolio is liquidity, especially in less mature and less transparent markets. For many investors, investing in overseas real estate will require specialized expertise.

Investing In Real Estate Equity

Investing in real estate equity covers a broad range, from the direct purchase of a property to buying shares in a real estate investment trust (REIT) or a property unit trust. An investor’s concerns about diversification, liquidity, correlation and transaction costs will affect investment choices.

Equity real estate investments can be grouped according to the level of direct or indirect ownership.

Direct Property

Investors can purchase physical assets such as an office building or shopping center. Done on a relatively large scale by an institutional investor, these investments can be made through a segregated or separate account.

Investments can be made in a joint venture with another investor and/or an experienced operating partner or owned by a single investor. An advantage to this approach is the ability to target specific geographic markets or property types; investors have a great deal of control over their investment strategy.

By buying a physical property, investors would have invested in a hard asset and enjoy specific cash lows from rental income, in addition to any gains in value realized at the time of sale.

But there is another side to that physicality: direct ownership of property increases the illiquidity of the investment as it takes time to buy or sell a property. In addition, there are high transaction costs associated with property sales.

Pooled Funds

A pooled or commingled fund gathers capital from a group of investors and uses it to purchase a portfolio of properties; these investments can include property unit trusts in the United Kingdom, open-end real estate funds in Germany or private equity real estate funds in the United States.

Generally, pooled funds are able to acquire more properties than an individual investor, and so are able to have a more diversified portfolio of underlying properties.

Pooled funds can be either open-end or closed-end. A closed-end fund has a fixed term and aims to raise investment money, acquire assets, hold them for a specific period, then sell the assets for a gain. Open-end funds do not have a fixed term, and so investors can, in theory at least buy into the fund or sell out of the fund at their own discretion.

Real Estate Securities

Another way for investors to invest in property is through the purchase of real estate securities equity shares of publicly traded companies that invest in real estate, such as REITs or real estate operating companies (REOCs).

Investors can directly purchase real estate securities, or they can invest in a fund or separate account that is professionally managed. REITs, which have an advantageous tax structure by virtue of distributing almost all their taxable income in the form of a dividend, also offer attractive dividend yields and global REITs have delivered average

total returns of just over 9 percent annually over the past 10 years.

An advantage to investing in real estate securities is the speed with which an investor can build up a portfolio; it is much quicker to buy stock than it is to buy a building. Real estate securities can offer daily liquidity and pricing, as well as transparent reporting processes.

It is also much easier to invest in a portfolio that is broadly diversified by geographic region and property type compared with buying physical real estate.

Global Real Estate Outlook

The world is moving into a real estate investing environment with lower debt levels and lower expected returns. There will be more focus on rental income security, and less on capital gains from property price appreciation.

Expect the decoupling of global markets, which will have a significant impact on returns. Asian markets, excluding Japan, and emerging markets will be near-term winners, but volatile. Low growth in the U.S., U.K. and continental Europe will likely shift investors’ focus to income in those markets.

Private real estate investors have had trouble raising new equity, while listed REITs are shaping up to be in the best position for the next few years. Listed REITs have strengthened balance sheets by raising new equity, and with their experienced management teams, will be able to take advantage of distress in the real estate markets and will have the financial strength to develop new properties as demand for space returns.

Listed real estate securities are generally a leading indicator of the recovery of the real estate markets; thus there is already a significant rally in most global listed markets, in line with the broad equity market recovery. However, great value and growth opportunities abound for active managers.

In the direct property market, the emergence of distress has been slow, with banks continuing to subscribe to the extend and pretend strategy with regard to their commercial real estate loan books. However, those with access to equity and less reliance on debt funding are starting to see more distressed opportunities at great prices coming from those in immediate distress or in need of short-term liquidity.

With such a wide range of choices, global real estate investors should carefully consider their return objectives as well their risk appetite and volatility tolerance. As the universe of investment opportunities expands globally, so too does the stock of high-quality real estate assets investors can consider for expanding their sources for portfolio diversification.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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Global Investment Opportunities In The Middle East

By M. Isi Eromosele

The Middle East is strategically located in a global position that offers numerous dynamic investment opportunities. The region possesses one of the world’s largest major oil and natural gas reserves.

Looking to preserve the region’s economic viability well into the future, governments in the area are trying to wean their respective countries from continued economic dependency on their oil reserves. As such, policies have been established to attract increased foreign investment.

The goal is to change the respective economies from being oil-based to being technology, information and services-based. The convergence of factors such as a rush of regional diversification, privatization of state owned companies, population growth and regional integration create an environment that is quite responsive to economic investment.

There is a clear realization by Middle Eastern leaders that their economies must be turned away from a near total dependence on oil and state dominated control to one that is based on world class free market dynamics.

Dubai is a shinning example of how a country in the region can be transformed from one that had depended on one commodity, oil, to one that changed to a major financial, retail, tourist and multi-services hub. Dubai, a tiny oil exporting city-state has indeed undergone a remarkable transformation. A member of the United Arab Emirates, its leaders have succeeded in turning its economic focus from oil and gold trading to technology, telecommunications, retail, tourism, shipping and finance.

This major transformation differentiates Dubai from other surrounding Arab states, most of which are still stuck with sluggish oil dependent economies. Conversely, Dubai has become economically dynamic and politically stable.

While the Middle East suffered from the recent global financial and economic crisis, the impact varied across the region. Member countries of the Gulf Cooperation Council withstood the situation best, because they enjoyed very strong fiscal and external balances when the crisis began, or had a significant financial reserve from revenues during the oil boom.

Oil-exporting countries with large populations, however, entered the crisis with weaker fiscal and current account balances, and also are burdened by larger social commitments.

Presently, the Gulf Cooperation Council is a model for later development economies in the region due to its consolidation of progressive economic and trade reforms implemented to attract and retain foreign investment.

In their recognition of the need to enhance regional cooperation and economic integration in the area, the GCC was established on May 26, 1981 with a goal of facilitating and enhancing foreign investment among member states. The GCC is comprised of six member states: Saudi Arabia, Kuwait, Bahrain, Qatar, Oman and United Arab Emirates.

Since its inception, the GCC has made considerable progress toward economic integration, consolidation of rules concerning investment, trade, labor and external tariffs.

The entire Middle East region is growing at a rapid pace and the policy makers in most countries there have been progressive with economic reforms.

Some states, such as Dubai, have achieved a Singapore-type success with great efficiency. Other economies are in the process of accelerating economic reforms in order to emulate Dubai’s success.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

Copyright Control © 2011 Oseme Group

Business Investment Opportunities In Asia

By M. Isi Eromosele

Asia, with its high energy economies and constant innovation, present a unique environment for business investment opportunities. China has certainly made its presence felt in the global market, with an economy that is growing faster than that of any other country in the world.

With an average economic growth rate of 12 percent during the past decade, China is changing the face of global business competition and economic power. With converging factors such as high level of exports, a vast pool of low wage labor and extraordinary level of direct foreign investment, China is fast becoming a global economic powerhouse.

The huge and still growing Chinese population offers a major market to international companies in several industries. Japan, which has the world’s second largest economy, is economically stirring again after a decade of moribund economic performance, helped by Chinese demand for its capital goods.

Korea, which had overtaken Japan in steel production, shipbuilding and semiconductors, is now on the verge of doing the same in consumer electronics. With China setting the pace, these big Asian economies, as well as others such as India, Thailand, Philippines and Indonesia are becoming key players in the world economy which multinational companies cannot ignore.

Southeast Asia has recovered swiftly from the global financial crisis that started in 2008, helped by large monetary and fiscal stimulus packages efficiently implemented by governments to support domestic demand. While there are recent uncertainties surrounding the global economy, specifically the European sovereign debt crisis, the recovery in Asia has not being derailed.

Singapore expanded its gross domestic product by 15.5 percent on a year-on-year basis in the first quarter of 2010. The economic GDP in Malaysia grew by 10.1 percent year-on-year while growth in the Philippines reached 7.3 percent.

Despite recent political difficulties, Thailand posted a first quarter GDP that rose 12 percent from a year earlier, its fastest growth in more than a decade. Activity has remained robust across the region in the second quarter of 2010. For example, Singapore’s exports have risen up 2.1 percent in April from March.

The rebound reflects how fiscally strong the region was at the start of the recent global recession. Following the 1997-98 Asian economic crises, the financial system in the region was thoroughly reformed. As such, governments had enough monetary and fiscal space to boost liquidity and maintain their economies during the recent crisis.

The stimulus provided by governments allowed Asia to weather the global downturn and perform better than expected, although with significant variance across various economies in the region.

China’s booming economy has had a positive pull on the recovery of the economies in this region, by taking a rising share of Asia’s exports. Though Asian domestic demand has risen, China remains an important destination for the region’s exports.

With a healthy fiscal position and sound macroeconomic management, helped by strong infrastructure, the region is in a much better position to assimilate added foreign investment from companies that are looking for business opportunities in various industries.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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Investment Opportunities In Latin America

By M. Isi Eromosele

Companies worldwide are discovering the enormous potential of the Latin American markets. Succeeding in the new Latin American markets is challenging because of the dramatic changes affecting various aspects of life throughout the region.

Globalization is having a dramatic but positive effect on most economies of this region. So are political changes that have seen democracy flourish in practically all the countries, ushering in economic reforms and deregulation. This has resulted in the dismantling of state monopolies, privatization and deregulation of various components of the infrastructure value chain.

Superb opportunities have emerged from a golden triangle of the Brazilian, Mexican, and Central American markets, which represent two thirds of the region’s market power. Investment opportunities abound in such sectors as consumer, retail, telecommunications, energy, health, and financial services, among others.

With astute planning and well crafted strategies, companies can successfully navigate through the value chain of industries ranging from manufacturing to finance and marketing.

A studied look at some important statistics confirms the presence of great potential market opportunities in Latin America. These include the growing sophisticated new Latin American consumers with increased earning power, changing demographics, changing economics, changing consumption patterns; a projected $1 trillion U.S. Latin market by 2012 and 600 million Latin American consumers.

Additionally, Latin America has some of the fastest growing market segments in the global emerging economies. With the growing use of technology, including the Internet throughout the region, the value chain is transforming planning, control, marketing, distribution, and customer service throughout the Latin American business and market worlds.

The key to business success within this region is to choose the right platform. It is also imperative that companies strive to understand the local cultures and the unique Latin American marketplace. There are dynamic and political forces that are transforming the region, raising its profile in the world economic scene. A spectacular example is the emergence of Brazil as a global economic power in such areas as energy, commodities, finance and manufacturing.

Companies interested in investing in Latin America would need to position their business interests in such a way as to grow and prosper in the flow of the region’s sometimes surprising but positive economic developments. Today, most countries have liberalized their currency controls so that there are few restrictions on currency conversion and capital transfers to and from the region. In March, Brazil largely ended its restrictions on international currency transfers and payments in Real, the local currency.

There are fewer restrictions on foreign investment. Generally, foreign investment is permitted in virtually every sector and there is substantial foreign investment from Spain, Europe, Japan and the U.S. in industries such as banking (particularly by Spanish and US banks), telecommunications and utilities. Restrictions, such as Mexico’s ban on the foreign ownership of oil interests, are rare.

A new and revived Latin America has emerged as an appealing investment environment for companies of various sizes. While there are challenges, the market opportunities and the rewards they offer outweigh those challenges.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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Investment Opportunities In Global Frontier Markets Part I

By M. Isi Eromosele

Frontier markets and the mutual funds and ETFs that invest in them are quickly becoming a separate and distinct asset class from emerging markets. Frontier markets describe the less developed, less liquid countries that make up emerging markets. Examples of frontier markets include Bulgaria, Croatia, Kazakhstan, Nigeria, Sri Lanka and Vietnam. They have now become a hot investment item.

Standard and Poors introduced its Select Frontier Index, which tracks 30 companies in October of 2007. The Index is presently updated monthly with fast track plans to start doing so on daily basis very soon. S & P also offers the IFC Global Frontier Markets, which tracks 270 companies. Year to date, this index is up 28 percent; last year, it was up 36 percent.

MSCI Barra has also launched a frontier markets index called the MSCI Frontier Markets Indices. The MSCI Frontier Markets Indices cover 26 markets, tracking performance of a variety of equity markets, representing a wide scope of investment opportunities to investors. Countries covered within this index include Argentina, Trinidad and Tobago in the Americas; Bulgaria, Croatia and Kazakhstan in Central and Eastern Europe; Nigeria, Kenya and Tunisia in Africa; Jordan, Lebanon and United Arab Emirates in the Middle East; Pakistan, Sri Lanka and Vietnam in Asia.

Changing global realities have engendered a transition that has resulted in these frontier markets, formerly discounted as too risky, now being viewed as hot investment opportunities.

It is notable that large investment companies have rolled out mutual funds and exchange-traded funds that put all or at least a big slice of their money in frontier countries. T. Rowe Price Africa and Middle East Fund is a good example of this new trend. As of the end of April, 2010, the company had invested about 75 percent of its $207 million in countries including Nigeria, Kenya and Qatar. For the 12 months through June, it returned 17 percent.Claymore Securities and Invesco PowerShares, two other leading providers of exchange traded funds, have also introduced frontier index products.

The profit advantages of investing in frontier markets is being crystallized as a result of the economic and fiscal difficulties being experienced within the American and European economies, where interest rates are drooping. Additionally, recent returns from investing in stock markets in leading emerging nations such as Brazil, Russia, India and China have been disappointing.

Frontier markets did not participate in the huge global run-up of 2009 as emerging markets did and as such were not overly affected by the resulting financial crisis. The positive is that these markets are pleasingly valued in comparison with emerging markets.

As with any other investment vehicles, there are risks associated with investing in frontier markets. Political instability in emerging countries is one of them. In the smaller frontier markets, liquidity is also a risk. The regulatory scheme within these countries varies and often provides far less oversight than in more developed countries. On a more positive note, frontier markets are less influenced by global conditions such as the current European budgetary crisis. Regardless, the rewards outweigh the risks.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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Copyright Control © 2010 Oseme Group

Investment Opportunities In Global Frontier Markets Part II

By M. Isi Eromosele

The frontier global index has been helped along by positive returns in three of its important markets - Nigeria, Kuwait and Qatar.

It is widely agreed to by most index funds, including MSCI that Nigeria is in the forefront of enabling profitable returns on investment as a frontier market. The country is being touted as the next Brazil, with its large population of 150 million and enormous base of natural resources. Nigeria is blessed with the world’s 9^th largest oil reserves. An added advantage in this category is that its light crude oil, which can be more easily refined into gasoline, is very much in demand globally, especially in the United States.

Most of Nigeria’s oil is produced in the Niger Delta area of the nation. This region has been restive for many years, as some of its residents rebelled against what they viewed as unfair treatment in the lack of development in the area. Additionally, they complained that they were receiving too small a share of the oil profits. During the past year, the unrest has ended and the Niger Delta area has stabilized. Politically, the country has also advanced. Nigeria, which was formerly a military dictatorship, has had several democratic transitions, a sign of political stability that is helpful to economic advancement.

The global rise in commodity prices has also helped Nigeria and other African economies that are resource-rich. Economic policy makers in Nigeria have hyperinflation firmly under control and liberalized trade has been introduced. Strictly enforced banking reforms and regulations have been implemented that have elevated the Nigerian banking sector to world class standards of accountability and transparency. This combination of resource wealth and macro economic stability is attracting new investors to the country.

There are diversity in the resources and economic strength of countries in the frontier markets. Kazakhstan, for example, produces oil, metals and minerals, while Argentina sells soybeans, corn, wheat and beef. Vietnam excels at manufacturing. As a result of this diversity, their stock returns tend not to move in lock step with those in developed and emerging markets.

Eastern European frontier markets will trade in line with each other but very differently from the African countries. As such, a small frontier allocation can provide diversification in a portfolio. This does not mean that frontier markets investments are without risks.

Some frontier countries have corruption and other experience more political crises than the typical developed markets. Many are highly volatile, so investors need a very long time horizon. However, investors need not shy away from investing in them. Positives for doing so are that they are relatively diverse, highly populated and growing economically. They may not be fully established but they definitely merit investment consideration.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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Copyright Control © 2010 Oseme Group

Africa's Untapped Investment Opportunities

By M. Isi Eromosele

Africa has the largest accumulated unexplored reserves of gold, antimony, bauxite, chromite, cobalt, diamonds, fluorspar, hafnium, manganese, phosphate rock, platinum metals, titanium, vanadium, vermiculite and zirconium, key minerals that are crucial to economies in the developed world economies. Africa supplies 8 percent of the world’s demand for aluminum, cement, coal, copper, graphite, iron ore, lead, steel and zinc; and it supplies 33 percent of the world’s need for bauxite, cobalt, gold, manganese, phosphate and uranium. Additionally, Africa supplies 62 percent of the world need for chromium and diamonds.

Many investment opportunities have been lost by foreign investors because of they believe the supposition espoused by the international media that investment in Africa is highly risky. This supposition does not represent the reality on the ground in Africa. The level of risk involved in investing in Africa is no higher than that present in other emerging economies of the world, including in Asia.

According to the Overseas Private Investment Corporation (OPIC) and the UN trade agency, UNCTAD, Africa offers one of the highest returns on direct foreign investment in the world, far exceeding all other global regions. While production of oil is the major driver behind those returns, other sectors offer impressive growth potential. One of the fastest or these growth areas is telecommunications. Cell phone use in Africa has been growing at an annual rate of 52%, higher than in any other region of the world.

The strategic role played by Africa within the world economy is expanding. The combination of Nigeria and Angola will soon surpass the Middle East as the main supplier of oil to the United States. It should be noted that the bulk of the gasoline used in the U.S. is derived from the sweet crude light oil supplied by Nigeria. Angola is the top supplier of oil to China. China, India and Brazil are rapidly increasing their business dealings with Africa. These new emerging economic powers often beat out firms from developed countries in their bidding for major development contracts in Africa.

With a population that continues to grow exponentially, Africa offers a consumer base of more than 900 million people. While more than half of Africa is estimated to live on a dollar or less a day, there is a growing well educated, high earning middle class who have high spending power. There are also surprising opportunities among the lower income population.

Nigeria, the largest African country by population, with the second largest economy in the continent have considerably improved the excellence of its capital markets, fronted by a visible and transparent reform in its banking industry. This has resulted in regulated and affordable bank lending that has helped spur growth in the country’s economy. Nigeria’s stock market has risen by 20 percent in 2010 and its inflation rate is well under control.The financial reforms in Nigeria have led to similar developments in other African countries.

Africa is becoming a more attractive target for all types of investors, including strategic and institutional investors, who see the reforms that are being implemented in its regions and recognize the continent’s potential for economic growth. The countries that will benefit the most from this increased interest are those that are politically stable and continue to implement economic reforms and improve the business climate.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

http://twitter.com/osemegroup | http://twitter.com/oseme22

Copyright Control © 2010 Oseme Group