Two Different Worlds

I’m back in the US today, after a horrendously long flight out of Bangkok. I am trying desperately to get used to being in Indiana, driving on the right side of the road and not having easy access to street vendors selling spicy somtam and noodles. It’s always a culture shock coming back to the Midwest, even for a native-born American. I must acclimate myself by indulging in steak and potatoes, wearing shoes inside the house, and watching The Simpsons on television.

For the first time in recent memory, real estate is no longer the “sure thing” investment people always told us it was. “Never mind the stock market,” they told us. “Buy real estate. You can’t lose.” REIT funds were considered rock-solid. But people did lose. Homeowners lost, landlords lost, investors lost, and the losses keep mounting, at least here in the States.

But, people are still putting money into real estate — just not in the United States any more. For those who still believe in real estate as an investment, it’s time to look elsewhere for opportunities, and that means looking to the Far East, where there is still growth happening and considerable building going on. JPMorgan Asset Management closed out its JPMorgan Greater China Property Fund last week with more than $600 million in capital commitments. The fund invests in real estate projects throughout all of greater China, including Macau and the other special economic zones. The fund is taking advantage of the continuing economic growth and rising incomes throughout China, where demand is strong for real estate. This is particularly evident in Macau of course, where major construction projects are evident everywhere.

But while building is going onward and upward throughout Macau, Las Vegas isn’t doing quite as well by comparison. Australian billionaire James Packer just scrapped a $5 billion plan to build the tallest casino in Las Vegas — an ambitious project that would have been spectacular, but the credit crunch and other financial troubles in Vegas and elsewhere in the States have killed the project. Packer’s Crown group of casinos include projects in Melbourne, Perth, and of course, Macau. The Vegas project would have created a 5,000-room hotel on the Strip, and would have included a 1,064 foot tall tower.