Private Capital Advisory

2010 overview

Public speaking engagements andPresentations

List of engagements1) MIPIM (Cannes) March 20102) Vietnam Investment Summit (Ho Chi Minh City) June 20103) FT Property Conference (London) September 20104) Retirement Communities World (Singapore) October 20105) MIPIM Asia (Hong Kong) November 20106) Urban Waterfronts (Qatar) November 20107) Real Estate Investment World (New York) December 2010

 

9am – June 9th, 2010

Institutional and Money Managers’ Panel

Evaluating the risks and returns of Vietnamese investments to substantiate why Vietnam should be part of investor portfolios

andUnderstanding investor requirements and modes of engagement to encourage participation in

capital raising for Vietnamese real estate

Mr Bromme H. Cole(Moderator)

Managing Partner, Hampton/Hoerter Private Capital Advisors

Mr Jonathan ChengManaging Director, Jen Capital Advisors Limited

Mr Scott GirardCEO & Chief Investment Officer, Asia, Prudential Property Investment Management

Mr William, Quang Trung NguyenChief Executive Officer, Vietnam Alliance Capital

Mr Tony NgoHead of Investments, Horizon Capital Advisers

Welcoming remarks and introduction of panel topic and panelists

Thesis: Many investors view Emerging Asia as attractive investment destinations relative to many developed markets. This isdue to their stronger growth prospects, better demographics, lower government debt burdens, and adequate external liquidity.These same investors also, of course, believe the combination of these factors is likely to maintain capital inflows into thesecountries.

Discussion on fundamentals:a) Vietnam is a BB risk‐‐‐‐‐‐Your return expectations for this sovereign exposure?b) Vietnam compared with its peer group‐‐‐‐i.e., Indonesia/Philippinesc) Vietnam has looming issues with undisciplined fiscal policy, inflation, trade deficits, currency weakness….why bother?

Thesis: In the perfect world, investments would appreciate or succeed because of strong fundamentals and go down whenearnings deteriorate. In reality however, this is far from the truth. There is no doubt that fundamentals of the company play ahuge role in its stock price, but psychology plays a big role in prices as well due to the inherit nature of any supply and demandmarketplace. Sometimes, companies with strong and growing earnings are sometimes unjustifiably punished just because thewhole market is going down. In order to measure this, Beta was created.

If beta is the measure of how prices relate to the overall market, alpha measures everything else that affect the price of aninvestment. High alpha stocks tend to rise even when the whole market falls, and therefore it’s a very desirable attribute for astock.

These measures help with the Macro‐economic concerns of building a portfolio.

Risk vs Return:a) How do you evaluate the Beta/Alpha in prospective Vietnamese investments? Do they really have concrete application 

in an emerging market?b) In terms of real estate investment, which of the primary land uses offer high beta/low alpha?c) And is there a north/south component to the risk/return model?d) Micro risk management issues…..

Panel wrap – up and summary

Uncovering investor perceptions on real estate trends in Vietnam

1. What are the dominant challenges and objections and where are they likely to invest their capital?2. Should Vietnamese real estate be included when structuring a global tactical asset allocation model?3. In an emerging market such as Vietnam, should institutions consider investing in private equity in exchange of using funds as

vehicles?4. One of the subtext’s for this panel was “Understanding investor requirements and modes of engagement to encourage

participation in capital raising for Vietnamese real estate”….isn’t it just as important, perhaps more so, to understand localbusiness and cultural requirements and modes of engagement….”?

[Opportunity for audience questions]

 

“Bright green light” for local real estate market By Dong Hoa

Hanoi, Vietnam 21.6.2010 – “A new wave of foreign investment is expected to flow into Vietnam beginning in the fourth quarter 2010”, remarked Bromme H. Cole, Managing Partner of the US based Hampton/Hoerter LLC, while moderating a panel of speakers at the Vietnam Investment Summit in Ho Chi Minh City. Mr. Cole adds, “If investors are giving China a yellow light and a green light for Korea, our message to them is Vietnam is definitely a bright green light as this country is Asia’s most vibrant and promising emerging market.” “The investors we speak with are seriously investigating opportunities in Southeast Asia and we are recommending Vietnam,” he said, adding that Vietnamese property opportunities are being considered by institutions as they structure their global tactical asset allocation models. Cole fully expects institutional investors to select experienced local partners as opposed to proceeding with investments directly. Cole says the Vietnamese market of 90 million people is growing very rapidly and it will not be long before a strong middle class emerges. Cole noted, “At this point in Vietnam’s development, institutional investors are primarily interested in residential opportunities, second homes and resort development as these developments offer a high degree of liquidity. The market for office and retail projects isn’t as mature and secondary trading is relatively thin with these assets.” Cole agreed that land prices are increasing rapidly and this can be attributed entirely to speculation. However he believes that this issue can be resolved with greater free market access to land use rights. Cole cautions, “Vietnam must take its time with opening up its property markets; a comprehensive master plan is essential which must include a solution the transportation infrastructure issues that plague both Hanoi and Ho Chi Minh City.” As part of his research into the marketplace, Mr. Cole visited Hanoi’s Ecopark development and commented that, “The concept of a self sufficient, master-planned community complete with recreational amenities has come to Vietnam. The demand for this type of lifestyle development is clearly strong and is indicative of a discerning, astute consumer.” At present, Hampton Hoerter represents two seasoned Vietnamese developers with advanced plans for mixed use projects in both Hanoi and Ho Chi Minh City. Mr. Cole noted that the robust demand for quality intermediaries will likely induce his firm to open a representative office in Asia by the end of this year.  

 

 

 

Private Capital Advisors

2010

“Foreign Direct Investment into China”RCA Panel:

Alternative Structures

Hong Kong New York

SINA Structure

Offshore holding company has controlling interest in domestic company via series ofcontractual arrangements rather than owning direct majority equity stake – No MOFOCMapproval required as of yet but not yet fully scrutinized

Technical service

license agreement

shareholder proxy to vote all rights

call option to purchase a portion or all of the equity

Disadvantages

Private Equity

2010

Lack of direct equity ownership allows FIE’s to skirt limitations on “restricted industries”

Difficult exit – Must have call option

Real Estate

2010

JV Partnership

Traditional structure – financial partner offshore bonds with land rich partner onshoredividends and shares are distributed under the principle of strict proportionality

representation on board of directors is allocated in proportion to registered capital

Hybrid structure CJV allows partners to contribute cooperation or non cash consideration for ownership butimposes unlimited liability

Disadvantages

PRC statutory requirements force unanimous board approval on major capital issues – Post formation structural changes require PRC approval

Members of JV may behave like delegates of respective companies and less like representatives of the JV

2010

Day One/Stream Two - Foreign Direct Investments Addressing the demand for eco-friendly and holistic waterfront projects: The new global asset of choice for investors and asset purchasers

• Going green - Examining the increased demand for sustainable projects

• Exploring the opportunities in investing and managing green 'assets' within a waterfront project context

• Understanding the need for eco-friendly, new age environmentally conscious investors to maximize their return on investment

Bromme H. Cole Managing Partner Hampton Hoerter, Hong Kong – New York Lecture topic – The temporality of sustainability 

Private Capital Advisors

2010

The temporality of sustainabilitySession Two:

Hong Kong New York

2010

In Conclusion!

There is no question that “Sustainable Projects” are becoming the new investment standard for many property types.

We are limited only by our imagination for new “Green Asset” opportunities in which to invest. Managing these assets will also spark additional specialized industries.

Waterfront development as an asset class is experiencing a renaissance….most of the world’s largest cities have waterfront…the opportunities are vast.

So! We are all set! Fully engaged in the fracas of our ecological revolution….prepared to meet the onslaught of climate change…..whatever it may bring!

But, is there another global dynamic that makes our green revolution merely a skirmish?....merely a scuffle within a

greater conflict; insignificant by comparison?

2010

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1632 - 1723 Antoni Van Leeuwenhoek- First to develop concept of food chains

1809–1882 Charles Darwin - Founder of evolution by means of natural selection, founder of ecological studies of soils

1842–1911 Ellen Swallow Richards - Pioneer and educator who linked urban ecology to human health

1871–1955 Arthur G. Tansley - First to coin the term ecosystem in 1936 and notable researcher

1911 James Lovelock – Developed Gaia hypothesis

1960’s Space exploration and Apollo Moon expeditions

How did we get here?

1972 First UN ecology conference in Stockholm on the “Human Environment”

1997 Kyoto Protocol – environment becomes politicized

2000 – present Hollywood gets involved

1990 – 1997 BREEAM and LEED standards created

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Tipping point

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Perception becomes reality

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Questions central to financial investment:

Will the opportunity recapture its investment?

Will its return be higher than its less eco- sustainable competition?

Or does it make more sense to just invest in run-of-the-millacquisitions and developments?

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1) During the present century world population will have grown from somewhere around 1.6 billion in 1900 to more than 6.5 billion in the year 2010, an almost four-fold increase in but 100 years. This is an unprecedented numerical expansion.

2) Even if a fully effective program of zero population growth were to be implemented immediately, by limiting human fertility to what demographers term the replacement rate (roughly 2.1 children per female), human population would nevertheless continue its rapid rate of expansion.

3) It is essential to understand that population growth is also significantly affected by changes in mortality rates. In fact, demographic transition theory predicts that the earlier stages of rapid population expansion are typically fueled more by significant reductions in death rates than by changes in birth rates.

4) It is important to recognize that the quantitative scale, geographic scope, escalating pace and functional interconnectedness of these impending demographic changes are of such a magnitude that there are few if any historical precedents to guide us.

J. Kenneth Smail writes:

2010

5) Given the data presented thus far, it becomes increasingly apparent that the time span available for implementing an effective program of population control may be quite limited, with a window of opportunity that may not extend much beyond the middle of the next century.

7) It is becoming increasingly apparent that rhetoric about "sustainable growth" is at best a continuing exercise in economic self-deception and at worst a politically pernicious oxymoron. Almost certainly, working toward a "steady-state" sustainability is much more realistic scientifically, more attainable economically and (perhaps) more prudent politically.

6) It is extremely important to come to terms with the fact that the earth's long term carrying capacity, in terms of resources broadly defined, is indeed finite notwithstanding the high probability of continued scientific/technological progress.

8) Only about 20% of the current world population (ca. 1.2 billion people) could be said to have a "generally adequate" standard of living, defined here as something approximating that of industrialized Western Europe, Japan or North America, the so-called developed world. The other 80% (ca. 5.5 billion), incorporating most of the inhabitants of what have been termed the developing nations, live in conditions ranging at best from mild deprivation and severe deficiency to the worse: sub-human."The power of population is far superior to the power of the earth to produce subsistence for man…” Malthus T.R. 1798. An essay on the principle of population

2010

Source: www.footprintnetwork.org

2010

Revised Conclusion!

There is no question that “Sustainable Projects” are becoming the new investment standard for many property types. VERY TRUE!

We are limited only by our imagination for new “Green Asset” opportunities in which to invest. Managing these assets will also spark additional specialized industries. VERY TRUE !

Also True:

Sustainability is a relevant concept…not an absolute oneThese “Sustainable Projects” are optimally sustainable at the

standard of living for which they were designed; in a world of 11 billion people these projects are NOT sustainable.

We have a “trade” ahead of ourselves: reduce population or reduce standard of living.

2010