J. #Safra Sarasin Snaps Up #Geneva Landmark

Brazilian-Swiss bank buying BNP's emblematic building in the heart of Geneva's financial district  

Banking group J. Safra Sarasin is buying a 15,000-square meter building in Geneva from BNP Paribas for

#Evergrande: “Kill the Chicken 🐓 , to scare the Monkeys 🙉 🙈 🙊”

Evergrander Debts: ~$300 Billion in liabilities. ~7X in 7 Years

Who's the monkey, you ask? 

There are two mainly

Geneva Mansions Sell at Discount as Tax Scares Expats - Bloomberg

Of course 'at a discount' in Geneva is all relative...

Asking prices for luxury homes in Geneva fell by an average of 9 percent to 14,829 francs per square meter since peaking in 2011

Geneva Mansions Sell at Discount as Tax Scares Expats

By Simeon Bennett and Giles Broom - Aug 26, 2013

Real estate broker Alexander Koch de Gooreynd relayed a difficult message to a client last June: the 39.5 million Swiss-franc ($43 million) asking price for his eight-bedroom lakefront villa in Geneva was too high.
The 8,600 square-foot (800 square-meter) home with yacht mooring, wine cellar and kennels in Collonge-Bellerive, where Saudi Arabia’s King Fahd built a summer palace in the 1970s, had been on the market for nine months. The seller took his advice and the house sold for 31.5 million francs in December.
“The heady days are over,” said Koch de Gooreynd, head of London-based Knight Frank LLP’s Swiss residential team, adding that the house might have fetched the higher price two years ago. “Vendors are becoming much more realistic.”
Geneva luxury-home prices, among the highest in the country, are tumbling as buyers are spooked by proposals to end tax breaks for foreign millionaires and the number of multinationals moving to the city slows. Houses in Geneva worth at least 6 million francs have declined by as much as 25 percent in the past 12 months, said Sebastien Rohner, a Geneva-based broker at Barnes International Luxury Real Estate.
“I’ve never known a slump like this before,” Rohner said. “Wealthy people are still attracted to Geneva, but they are taking their time and renting before buying.”

Market Stagnation

The slump in Geneva’s luxury market comes as the average house price in the city declined 1 percent to 2.6 million francs in the first half of 2013 from a record high in 2011, according to data compiled by Wuest & Partner AG, a real estate consulting firm with offices in Geneva and Zurich. House prices in Geneva more than doubled in the previous 13 years, while values in the rest of Switzerland rose 53 percent, Wuest & Partner’s figures show.
“In regions like Zurich and Lake Geneva, where house prices have reached a pretty high level, there is stagnation or a modest correction,” said Robert Weinert, a market analyst at Wuest & Partner in Zurich. “Prices have reached a level where not many people can afford them.”
UBS AG (UBSN)’s Swiss Real Estate Bubble Index rose in the second quarter as mortgage lending in Switzerland increased 4.3 percent from a year earlier, exceeding a gain in disposable household income of 1.4 percent, the country’s biggest bank said on Aug. 5.
To prevent a repeat of the property-market crisis of the 1990s, which hobbled economic growth for years, the Swiss National Bank sponsored the introduction in February of a capital buffer, which forces lenders to hold an extra 1 percent of risk-weighted assets tied to residential mortgages.

Cooling Market

That helped cool Geneva’s housing market by pushing up the 10-year fixed home loan rate to 2.4 percent from 1.8 percent in February, Weinert said.
Geneva, less than a two-hour drive from the ski resorts of Chamonix and Verbier, has used low taxes, political stability and quality of life to lure more than 900 multinationals, including Procter & Gamble Co. (PG), commodity traders such as Gunvor SA and hedge fund managers, Brevan Howard and BlueCrest Capital Management LLP. In 2009, Dinara Kulibayeva, second daughter of Kazakh President Nursultan Nazarbayev and the billionaire owner of Halyk Savings Bank, bought a house in the Geneva suburb of Anieres for a record 74.7 million francs.
The influx of expatriates has slowed, sapping demand, said Claudio Saputelli, an economist at UBS in Zurich and co-author of the bank’s quarterly bubble index report.
“We’re not seeing as many expats moving to Geneva,” said Saputelli. “The market has become more and more difficult for high-end apartments.”

Tax Break

Germany’s Merck KGaA last year announced plans to close the Serono unit it bought from billionaire Ernesto Bertarelli in 2007, resulting in the loss of 1,250 jobs in Geneva.
Wealthy foreigners were also drawn to Geneva by a 150-year-old tax break that enables them to avoid paying income tax via an expenditure-based levy known as a forfait. Geneva’s Socialist Party in January 2012 submitted the 10,000 signatures necessary to force a vote on abolishing the program. While the Geneva government and a majority of the canton’s lawmakers voted in June to reject that proposal, the initiative prompted the canton to consider revising the tax break by September 2014.
“This indecision, it kills the market,” Koch de Gooreynd said. “It’s any concern that things might be about to change.”
After Zurich became the first canton to abolish the forfait in 2009, with almost 53 percent voting against the system, 97 of the 201 beneficiaries of the tax left the canton. About two-thirds of them relocated to other parts of Switzerland.

Negotiating Room

Asking prices for luxury homes in Geneva fell by an average of 9 percent to 14,829 francs per square meter since peaking in 2011, according to UBS. In the suburbs of Florissant and Malagnou, east of Geneva’s old town, the drop was 24 percent.
The decline is probably even steeper because the numbers are based on advertised asking prices and weaker demand is enabling buyers to negotiate better deals, said Saputelli.
“More and more prices are under discussion,” Saputelli said in a phone interview. “That wasn’t the case two or three years ago, when demand was so high that you had no chance to bargain the price down.”
The decline will probably continue for another 12 months, said Christian Kraft, head of Swiss retail estate research at Credit Suisse Group AG. (CSGN)

Scared Buyers

The number of new buyers has fallen by half, said David Colle, managing director of Luxury Places, a Geneva-based brokerage. “People are scared a little bit, they’re just waiting,” he said. “There’s less demand, there’s less buyers coming every day to us.”
In Cologny, another of Geneva’s millionaire lakeside suburbs, there are 10 to 15 homes on the market for more than 10 million francs compared with just one or two back in 2011, Knight Frank’s Koch de Gooreynd said.
“Buyers are increasingly savvy now, especially with such a big selection out there,” he said. “Still, Switzerland remains one of the key markets for people to invest, relocate their business and bring their families due to the safe and secure environment, stable economy and the high quality of life available.”
To contact the reporters on this story: Simeon Bennett in Geneva at sbennett9@bloomberg.net; Giles Broom in Geneva at gbroom@bloomberg.net
To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Phil Serafino at pserafino@bloomberg.net; Rob Urban at robprag@bloomberg.net.

®2013 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Geneva Mansions Sell at Discount as Tax Scares Expats - Bloomberg


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Property Crushes Hedge Funds in Alternative Markets - Bloomberg

diversifying into alternatives makes sense even if they don't outperform.

Property Crushes Hedge Funds in Alternative Markets

Mackenzie Stroh/Bloomberg Markets
Hamilton "Tony" James says diversifying into alternatives makes sense even if they don't outperform.

“Why would anyone invest in the stock market?”

Hamilton “Tony” James looked up from his notes and peered out at the audience over the rims of his glasses. The investors seated in the chandelier-adorned meeting room of New York’s Waldorf-Astoria hotel had been in their chairs for hours. Yet James paused to let his point sink in. Someone laughed. James, president since 2005 of Blackstone Group LP (BX), was stone-faced.
The occasion was Blackstone’s third annual investor day, Bloomberg Markets magazine reports in its August issue. The firm is the world’s largest manager of so-called alternative investments, with $218 billion under management. It runs private-equity funds and hedge funds, invests heavily in credit securities and owns vast expanses of real estate. One of its properties is the Waldorf itself.
More from the August issue of Bloomberg Markets:

• COVER STORY: Michael Glimcher, Prince of Property
• PRIVATE EQUITY: Leon Black's Apollo Rises Again
• JAPAN: Abe's Urgent Agenda
• SOCCER: The Future of Women's Game in U.K.
• REAL ESTATE: Mega-Rich Landlords Out for Vengeance
• SAILING: Larry Ellison Speeds Up America's Cup

When James finally answered his own question about stocks, he told the audience they were a fool’s game compared with Blackstone’s investment funds, which have returned at least 15 percent annualized during the past 26 years, according to the firm. A good investment lately is Blackstone. The firm’s shares returned 89.4 percent during the 12 months ended on June 10, while still trading below their initial offering price in 2007.
Alternatives such as those managed by Blackstone have gained in popularity during the past 20 years as investors searched for alpha -- returns uncorrelated with and higher than those offered by the broad stock and bond markets.

Celebrity Investing

The people who run companies specializing in alternatives - - including billionaires such as Steve Cohen, Henry Kravis, John Paulson and Blackstone co-founder Steve Schwarzman -- have become celebrities. Assets overseen by hedge funds alone increased to $1.87 trillion this year from $118 billion in 1997 -- much of it from pension funds, endowments, family offices and sovereign-wealth funds.
Virtually every alternative category crashed in the financial meltdown of 2007 to 2009 -- none more severely than property, with housing and commercial real estate prices falling as much as 40 percent.
Yet as markets have recovered, it’s real estate that has led the way. The sector dominates Bloomberg Markets’ ranking of alternatives, which shows that real estate investment trusts -- which pool investor money to buy property and are sold like stocks -- have gained more than any other alternative category in the past three years. Large-capitalization REITs returned 17.3 percent annualized in the three years from March 31, 2010, to March 28, 2013, besting private equity, which returned 15.2 percent.

Index Search

To find the best-performing unconventional investments, Bloomberg searched its own indexes covering hedge funds, funds of funds, commodities and REITs. Bloomberg’s Rankings team also drew on outside indexes in search for the best-performing private-equity funds and collectibles, such as vintage cars, stamps, contemporary art and wine.
The best bets ranged from corn and silver futures, which returned 33.8 percent and 20.5 percent annualized over three years, to a Chateau Pavie Bordeaux and a 1957 Ferrari 250 Testarossa, which recently sold for $16.4 million.
Among the worst-performing alternatives were hedge funds, which returned 3.3 percent, and funds of hedge funds, which lost money overall. Most alternatives struggled to beat the Standard & Poor’s 500 Index (SPX), which returned 12.7 percent annualized over the three years ended on March 28 and was up more than 15 percent this year as of July 10.
James says that investing in alternatives makes sense even when they underperform.

No Correlation

“If you can put a bunch of money into these idiosyncratic investments, then you get a lot of diversification benefit because the returns are very uncorrelated” to the broader markets, he says, speaking from his office 44 floors above Park Avenue in Manhattan. “So even though you are putting a riskier asset in your portfolio, because it’s not correlated with everything else that you own, the portfolio volatility actually comes down.”
For investors in real estate and REITs, valuations fell further and faster than other assets and have in the past three years jumped higher than the S&P 500.
“If you wind the clock back to 2009, real estate had just been through a tremendous crash that helped bring down the global economy,” says Bob Rice, managing partner at New York-based merchant bank Tangent Capital Partners LLC and author of “The Alternative Answer” (HarperBusiness, 2013). “Things that are way down are going to come back. On top of that, central banks have given people a prevalence of cheap money to borrow and get back into alternatives such as real estate.”

Glimcher on Top

The return of consumer confidence has helped drive up REIT share prices by sending shoppers back to the stores. REITs that invest in shopping malls boasted the best performance for the three years ended on March 28, with an annualized return of 25.3 percent, according to data compiled by Bloomberg. Leading the list of best-performing mall investors was Michael Glimcher, whose Columbus, Ohio-based Glimcher Realty Trust (GRT) gained 38 percent.
Other categories of REITs that produced 20 percent-plus three-year annualized returns included self-storage units, industrial plants, health care, retail and Asian real estate.
Although REITs are still largely a U.S. phenomenon, they’re also a growing asset class in Europe and Asia. REITs globally raised $22.6 billion in the first quarter of the year, on pace to surpass the record $73.3 billion they collected in 2012.

REITs Triumph

“You’ve had tremendous gains in the assets that REITs are investing in, which is driving enthusiasm and performance,” says Brian Hargrave, chief investment officer at ZAIS Financial Corp. (ZFC), a mortgage-focused REIT run by Red Bank, New Jersey-based asset manager ZAIS Group LLC. “It’s a theme among investors to get exposure to the recovering housing economy.”
For U.S. investors, the advantage of REITs is that they’re required by the Internal Revenue Service to distribute at least 90 percent of their taxable earnings to shareholders as dividends, in exchange for paying little or no corporate income tax.
“That’s probably the single biggest benefit to the investor,” Hargrave says.
Yet real estate is a volatile and cyclical investment, with REIT prices rising and falling along with movements in the larger economy. That became clear in May, when U.S. Federal Reserve Chairman Ben Bernanke’s announcement that the Fed might slow its debt-buying program sent bond prices plunging. Shares of mortgage REITs fell 11.2 percent for the month ended July 10.

Leverage Rises

Meanwhile, the real estate moguls whose heavy borrowing helped fuel the 2008 financial crisis are back at it, taking advantage of Federal Reserve-driven low interest rates to amplify their returns through leverage. In an April report, the U.S. Treasury’s Financial Stability Oversight Council cited the borrowing of mortgage REITs as a source of instability in the economy.
“You’re starting to see more and more REITs that are borrowing to pay their dividends,” Tangent Capital’s Rice says. “That’s a bit of a yellow flag in terms of whether you want to be chasing the asset class right now.”
When central banks finally start raising interest rates, that could put a quick end to the new property boom, says David Fann, chief executive officer of TorreyCove Capital Partners LLC, a La Jolla, California-based firm that advises investment managers.
“Real estate has been a huge beneficiary of quantitative easing,” he says, referring to the Federal Reserve program to keep interest rates low by buying mortgage securities and other bonds. “When interest rates begin to rise, that’s going to curtail the longer-term appeal of real estate investing.”

Hedging Losses

Hedge funds, once the quintessential alternative investment, have been disappointing investors for years. The poor performance of macro funds, which make bets on movements in the broad economy, has been a reason for hedge funds’ overall mediocre 3.3 percent return.
Fund-of-funds operators, who try to find the best performers, have done even worse: Those funds lost an annualized 3.8 percent over three years. More than 600 funds of funds, or 25 percent of the total, have gone out of business since 2007. And assets under management in hedge funds have declined 13 percent in that period.
Even as the hedge-fund universe has shrunk, pension funds and other institutional investors have moved their money into the biggest, most successful funds.

‘Index Effect’

“Hedge funds in aggregate are going to look more and more like the broader market as their asset base continues to grow,” says Carl Friedrich, chief investment officer at Woodbury, New York-based investment adviser Piermont Wealth Management Inc. “You get an S&P 500-like index effect.”
Hedge-fund investors smart enough to bet on a rebound in housing via mortgage-backed securities fared well. Those funds gained more than 20 percent annualized during the three-year period. And the best of them, Metacapital Mortgage Opportunities, run by Metacapital Management LP’s Deepak Narula, returned more than 30 percent.
Commodities investors found the best returns in their breakfast cereal bowl: corn. While overall commodities gained a paltry 3.1 percent, corn futures returned 33.8 percent in the three years, as the U.S. government raised the required ethanol content of gasoline. Also, rising incomes in emerging markets increased meat consumption and thus grain purchases to feed the livestock.

Corn Roast

“Corn’s been going up in price over the last few years,” says Paul Ashworth, chief North America economist at London-based research firm Capital Economics Ltd. Ashworth said he believes corn and other agricultural commodities are overpriced and that what he calls a bubble will burst in the next few years. “We’re talking about low interest rates to buy farmland and also higher yields for corn per acre,” he says.
For wealthy individuals, alternative investing isn’t just about hedge funds and commodities. They also sink their money into collectibles such as stamps, coins, art and wine. Among those more-exotic investments, the top performers were classic cars and coins, with indexes that track prices of those collectibles up more than 15 percent annualized over three years.
Art connoisseurs lucky enough to own paintings by the late American artist Adolph Gottlieb (1903 to 1974) saw the value of his works rise by 65.5 percent annualized over three years. One Gottlieb painting, Balance, was sold at a Christie’s auction on May 15 in New York. The auction house’s projected sale price was $800,000 to $1.2 million. It sold for $3.3 million.

Buy Bordeaux

Meanwhile, wine investors who had been holding on to a bottle of 2004 Chateau Pavie Bordeaux saw its value rise 107.3 percent over three years. The wine sold in June for as much as $400 a bottle.
The alternative asset class that has made Blackstone a hot stock, private equity -- aka leveraged buyouts -- has benefited greatly from the post-crisis low-interest-rate environment.
“It’s one of the consequences of the great financial crisis,” TorreyCove’s Fann says. “In many cases, the large deals that were undertaken during the boom period got salvaged because of quantitative easing.”
One beneficiary was Apollo Global Management LLC (APO), the New York-based firm run by Leon Black. Apollo was able to refinance crisis-era debt in companies such as Harrah’s Entertainment Inc. that the firm bought at high prices during the bubble.
Today, private equity is bigger than ever. Global private-equity holdings surpassed $3 trillion of assets under management in 2011 for the first time, according to London-based research company Preqin Ltd., and have continued to grow. KKR & Co. (KKR) -- run by billionaires Kravis and George Roberts, his cousin -- owns companies that employ about 980,000 people. Blackstone’s portfolio of companies boasts more than 730,000 workers, while Apollo companies employ 370,000.

Fundraising Lags

Despite the buyout industry’s benchmark-beating returns, fundraising has lagged in recent years. Private-equity funds in the first quarter had taken an average of 18 months to close, the most in three years, according to Preqin. First-time funds secured just $4 billion globally in the quarter compared with $32 billion in the second quarter of 2008.
Private equity’s solution to the funding problem is to aim lower.
Blackstone, KKR and Carlyle Group LP (CG), the Washington-based buyout firm that manages $176 billion in assets, usually open their doors only to clients willing to commit at least $5 million. In the past year, all three have introduced offerings such as mutual funds and exchange-traded funds to cater directly to individuals.
Chasing 401(k)s
One goal is to penetrate corporate retirement funds, which will hold $5 trillion by 2016, according to Boston-based research firm Cerulli Associates.
“We definitely would like to be part of 401(k) platforms,” says Mike Gaviser, a KKR managing director.
In January, Carlyle started a fund with New York-based investment firm Central Park Group LLC that will accept as little as $50,000 from individual investors. It’s called the CPG Carlyle Private Equity Fund. CPG will allocate money from the pool to Carlyle-managed buyout funds.
“These things are selling like hot cakes right now,” Tangent Capital’s Rice says. “This is the next wave of alternative offerings.”
That’s cause for concern to David John, deputy director of the Retirement Security Project at the Brookings Institution in Washington.
“Should this start to take hold, there needs to be either a licensing, a seal of approval or some level of higher oversight so people don’t find that they are investing in something that really isn’t suitable for their stage of life,” he says.

‘Rational’ Investors

For both institutions and individuals looking for benchmark-beating returns, the world of alternative investing remains alluring.
“We are reaching a point when institutions are basically saying, why shouldn’t we allocate more money to an area with more return?” Blackstone’s Schwarzman told the audience at a Morgan Stanley conference in June. “And the answer is: Any rational person would.”
To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net.
To contact the editors responsible for this story: Michael Serrill at mserrill@bloomberg.net; Christian Baumgaertel at cbaumgaertel@bloomberg.net.

Property Crushes Hedge Funds in Alternative Markets - Bloomberg