Capital Stack in Singapore
Earlier this month, Mark did the rounds in Singapore, seeing key players in Private Equity firms, Fund Managers, Family Offices, Private Banks, as well as some fintech players. With so much talk about capital in Asia, the question is – what’s the deal?
The interest in Asia, particularly Singapore and Hong Kong, is well founded. Australian banks seem to be ever-tightening, meanwhile it’s well known that there is a lot more investment capital is Asia that is far more mature than Australia.
Long story short – there is money there that is looking for a home, which is available for property and business. Having said that, it’s not running out the door to just any old Joe.
That also doesn’t mean that there’s lots of cheap money though… Quite the opposite actually – the common theme is “we’re looking for yield”, meaning that the money is looking for a home that pays good rent.
Business & Property Lending
Plenty of appetite for property finance as debt and structured equity (a natural preference for many Asian investors), but also for lending to businesses.
One institutional fund manager that would typically not get out of bed for less than $50m, is recognising the opportunities in Australia’s tight capital market, so has started a subsidiary fund that is focusing on $15-50m, for property projects as well as to fund growth in trading businesses. On the latter, it’s true cash flow lending based upon a multiple of EBITDA, i.e. no reliance on property security.
Another example is a group backed by a single Ultra-High Net Worth family that provides unsecured Trade Finance (their security is the underlying goods).
Private Equity into Businesses
Private Equity firms are keen for opportunities – each has their own focus, whether on deal size, industry focus or growth phase of the business. As you might expect, PE firms there are particularly interested in businesses that are looking to grow into the Asian region – mixing Australian track record, capability & experience with their contacts & resources.
This is the real Private Banking, more so the Swiss style rather than the Australian “Red Carpet Retail”… Commensurately, the entry hurdle for these guys is a wee bit higher than a $250k salary and $1m net worth. Two key points to Private Banking:
- They’re more focused on management and recommendations of investments, more akin to a high-end financial planner & stock broker, rather than high-end home lending.
- Absolute minimum of US$2m needs to be invested with them – although some kick in at $5m or even $10m.
If you’re willing and able to tick those boxes, why would you want to use them? Global investment opportunities, not only listed but also unlisted and alternatives; ability to gear against financial investments. One other reason is lending – think an Australian investment-purposes home loan at no more than 3.5% (or lower if you want to borrow in another currency, although that only makes sense if you have income and assets in that currency to create a natural hedge).
Fintech & Crowdfunding
Fintech is absolutely the flavour of the day in Singapore… In the words of one very experienced banker over there, “any business school graduate that can write a business plan raises $100k for 5%, valuing their business at $2m with nothing but an idea!”. So there is a little bit of “whatever”, but there is some really impressive Artificial Intelligence-based tech coming through, with capabilities that would make your jaw drop. In the lending space, watch this space for crowdfunding property development lending, as well as business cash flow lending under $5m.
Show me the Money!!
All sounds too easy right – everyone should get on a plane and get some money? Cool your jets – it’s not that easy. Every group has a different appetite for location, asset type, deal size, etc.
Location is a big one for property – there’s lots of interest in London and the UK (although some mixed messages as some are getting concerned with Brexit); Sydney and Melbourne are in focus, “where’s Brisbane” can be an issue, but that’s a story for another day.
The simple answer to “is there an offshore option for my property/business/client”?