Emerging-market real-estate investors from Asia are betting big
on Miami. And the potential jackpot can be huge, because they have
an opportunity to build profitable businesses (and even industries)
in a well-populated, but still surprisingly untapped market.
The city is a proxy for Latin America and its 560 million
people. And current pending development deals are clear signs that
the world recognizes Miami as a major global gateway city - one
that is key to economic growth for its southern and, now, even its
This Company Is Set to Bet Big on Florida
In a surprise move, Malaysian gambling company Genting
(GMALY.PK) unveiled a $3 billion master plan for a huge destination
resort project right here in the United States.
Genting wants to build what could be the world's largest casino
on prime land along Miami's waterfront. The plans are in motion, as
the company has already spent about $450 million on real estate,
pledged to help rebuild part of an interstate highway and hired 23
lobbyists to press for legalizing casinos in Florida.
Genting's cash-rich status gives it an advantage over many
overburdened US casino operators, who embarked on building sprees
or leveraged buyouts just as the casino market in the US began to
sour. The company, which grew out of a single casino in Malaysia,
has holdings in a range of industries and made a reported $3.4
billion profit last year on $15 billion in revenue.
In Genting's case, the land is purchased, so plans are on track
to keep moving forward - even if the casino gambling battle doesn't
go exactly according to plan. The company bought prime downtown
real estate at a price that is attractive for a long-term investor
in this gateway city; it may simply have to adjust its timetable
for developing the property to its own specifications.
So, why Miami and not, say, destinations like Las Vegas or
Atlantic City where gambling is already legal? Well for Genting, it
also owns 50% of Norwegian Cruise Lines, which operates out of the
Port of Miami. So, it already has a vested interest in the area and
would benefit from increased tourism, particularly from
emerging-market travelers with money to spend.
Miami Market Heats Up for Another Emerging
In 2010, Greater Miami hosted a record 12.6 million overnight
visitors. And as a link between Latin America and the northeastern
US, Miami will draw 5 million more tourists a year - with windfalls
for airport concessions, local attractions, venues and hotels,
shops and tax coffers.
While this is not going to happen overnight, the key here is
that investing in the U.S real estate market is very attractive for
longer-term investors looking for solid returns.
But you don't have to buy property in Miami to make returns on a
potential real estate turnaround. All you have to do is look toward
the companies that are buying up the land at a steep discount and
watch what they're doing with it.
Another player in the recovering Miami commercial real estate
market is blue-chip conglomerate Swire Pacific Ltd. (SWRBY.PK), a
global real estate company based in Hong Kong. It unveiled plans
for Brickell CitiCentre, the $700 million retail, office, hotel and
condo tower project in the prestigious downtown area.
And this may not be the last international deal for Swire
Pacific, which sold Festival Walk, a multi-level shopping, dining
and leisure complex in Kowloon Tong, for HK$18.8 billion - the
most-expensive single retail real-estate transaction ever in Hong
In other words, they know something about successfully building
commercial real estate - and making their money back (and then
This company is one to put on your watch list, as Swire Pacific
has also applied to the Hong Kong stock exchange to list its real
estate unit Swire Properties and would distribute 18% of Swire
Properties shares to qualifying shareholders on January 18. The
long-awaited spin-off is meant to boost the profile of its property
and marine services business.
Forget "Location, Location, Location" - It's All about
"Cash, Cash and More Cash"
Since 2009, data from the Miami Association of Realtors has put
Miami at the top of the destination list for international
In the past, it was the South American developers from Venezuela
and Argentina who were normally involved in this market. Now the
shift that is taking place is that Asian investors have stepped in,
recycling US dollars and introducing larger projects to the
In fact, a prolific local condo developer named Jorge Perez has
been quoted as saying that South Americans "have effectively saved
the real estate market."
And in a recent statement to a Miami-based newspaper, Michael
Pappas, president and CEO of real-estate company The Keyes Co.,
said, "You're getting a lot of Venezuelans, Canadians, Brazilians
because they feel like there's a bargain."
Well, it looks like South America is getting a run for its money
from Asia - specifically, Hong Kong-based companies like Genting
and Swire … and, undoubtedly, many more to come from all over the
No matter where the companies are headquartered in the world,
these foreign buyers and investors are responding to Miami's
multiple draws: Location, a weakened U.S. dollar, fears of
political developments in their home countries, and real estate
that's cheap compared not only to 2005 prices, but also compared to
many other major cities both in the United States and abroad.
Is There a Good Way to Invest in These Real Estate
Before you pack up and head for Miami, even if it's just in your
portfolio, be careful about how you invest in this concept.
For example, if the ability to offer gambling comes through for
Genting, the company expects its project to come to fruition in the
next three to five years. But if not, it's more likely that the
resort (which is estimated to create 15,000 construction-related
jobs and another 30,000 additional jobs over time) will take about
15 years to build.
Remember, the company has a stake in Norwegian Cruise Lines, so
Miami real estate could be attractive to other companies operating
in the Port of Miami. Looking at those companies …
While there are some clear winners here, including the cruise
line companies that dominate the Caribbean routes, Carnival
) and Royal Caribbean Cruise (
), it's too early to invest in these two stocks yet.
Revenues from Mediterranean cruises have been clobbered by the
conflicts in the Middle East. And the disaster in Japan cut
bookings there, too. Higher oil prices have cut into earnings and
affluent investors are more skittish this season with higher market
volatility, passing up extra cruises and buying extra
For now, it's best to watch this developing trend, and to take
note of how these emerging-market real estate deals can be a real
game-changer for US-based cities and, in turn, industries and
I have no positions in any stocks mentioned, and no plans to
initiate any positions within the next 72 hours.
Wall Street's Bullish Bias