Wednesday, November 21, 2007

Societe Generale eyes 200 mln euros for India

Societe Generale to raise up to 200 million euros for India property fund *May enter South Korea and Singapore property markets (Adds comments, details)

By Eriko Amaha

TOKYO, Nov 21 (Reuters) - Societe Generale Asset Management plans to raise up to 200 million euros ($296 million) in equity by September 2008 to invest in residential property developments in India, a company executive said on Wednesday.

The fund management division of Societe Generale, which has already started investing in Japan, said the next Asian markets it is likely to enter will be South Korea and Singapore.

The French asset management firm is ready to establish a foothold in India, which it says has been relatively untouched by foreign investors compared with China.

"China is already largely invested by international funds because the country has been open for 10 years for international investors. But that is not the case for India," Jean-Christophe Ginet, global head of real estate at Societe General Asset Management, told Reuters on the sidelines of a property conference in Tokyo.

"We are in the middle of the first closing ... with 50 million euros, and the final size would be 200 million," Ginet said, adding that the first sum would be raised by January and the final closing will be next September.

Ginet said his firm had tied up with local partners in India to develop residential projects targeting middle and upper-middle class consumers.

"We are going to invest in roughly 10 to 12 township projects," he said. One project in Jaipur is a residential complex of 900,000 square metres (9.688 million sq ft), he said.

The fund will aim for an internal rate of return of 20-plus on a net basis after deducting costs such as fees and taxes.

Ginet also said Societe Generale hopes to expand its presence in Asia. "The next, in 2009, will be Korea. I think that's the time to enter Korea," he said, adding that Singapore was another market his firm would target.


Societe Generale is also raising up to 300 million euros in equity to own about 1 billion euro worth of Japanese assets with leverage, mainly small and mid-sized office buildings, within the next two to three years.

The company has already formed a partnership with unlisted asset management firm Atlas Partners Japan Ltd and has so far bought six buildings in central Tokyo.

Ginet said compared with large high-grade buildings, so-called Class A buildings, there is more potential for rental growth with Class B buildings, those that are small and mid-sized. Demand for office space remains strong while the supply of Class A buildings is limited and Class B buildings are feeling a spillover effect.

He expect the cap rate for Class B buildings, a return on property investment, to be compressed by at least 50 basis points to 1 percent within two to three years, as they will be more in demand, boosting their asset value. "And rental growth should be 5-10 percent per year" for Class B buildings, he said.

Ginet said Societe Generale has 1 billion euros worth of property asset under management, 80 percent in France and the remainder in Japan. It aims to expand that to 4 billion yen 2010, 60 percent of which will be in Europe and 40 percent in Asia.

Meanwhile, Ginet said it will take a few years for his firm to enter the U.S. property market, which has been reeling from the subprime mortgage problems.

"I think it will be time within two to three years. It's time to acquire distressed assets but we are not enough opportunistic," he said. "Let the crisis do its work and clean the market."


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