Real Estate Investment for the Brave!

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If you want to work in Real Estate Investment, ASEAN is definitely a good place to start! However, navigating your way through this industry can be daunting especially when there’s a lot of mystery surrounding it. We aim to solve the mystery today by interviewing Mr Adenan Yusof, Managing Director of Amanah Raya Berhad, Malaysia’s premier trustee company on real estate.

 

Breaking Ground

Q1: What got you interested in the industry and how did you arrive in the sector?

I started my career out of The Illinois Institute of Technology as an Architect. As my career progressed, even working for the KLCC project, I became more interested in the real estate investment industry. Being part of designing a building is nice, but I got more interested in actually investing and developing a property from the get go. In addition to the attractive career prospects, interesting job roles, the industry also yields substantially large returns. In order to do so, it requires you to operate in an environment that is very intellectually challenging like finding the right location, forecasting the business cycle and many more. So I really enjoy working in this environment.

Q2: What do people in your group like to read when it comes to following the sector?

We usually get resources from real estate consultants through their newsletter or calls with them. In addition to that, on a more basic level, we usually source our knowledge from business news, Bloomberg and also The Edge Property.

Q3: What qualities do firms in this industry usually seek in candidates?

 Aside from the normal analytical and being good with numbers, I think one of the most important attribute that I look for in a candidate is the ability to forecast the future as accurately as possible. It may sound bizarre but it’s a crucial attribute in the real estate industry. Therefore, in order to be good at this, one must be able to collate all the data available and be able to look at the bigger picture. We don’t prefer candidates that are very myopic in terms of what he/she is doing.

Related: Day in the Life of a J.P. Morgan Intern

 

Real Estate 101

Q4: What is the industry like? Give us the overview

Having been here for some time, I will try to put it in simpler terms.

Who: Real Estate Managers and decision makers.

What: Allocating the fund’s money into various property development.

How: Analysing the growth profile of the development projects, risk profiles, prospects as well as locations.

All of this is done to ensure that the investments provide better capital gains and also rent yield. Basically, each fund needs to ensure that the returns are sustainable and there are many metrics that has to be looked into to ensure that profits can be retained.

Q5: What’s your take on the real estate market in ASEAN? Are you looking to expand to ASEAN?

I think it is a market that is going tremendously. Looking at it from a macro perspective, ASEAN is mostly made up of developing countries and it is growing rapidly. As I said before, when the economy booms, real estate industry simultaneously grows in tandem with it. Hence, in Amanah Raya, we are looking at different ASEAN countries to try and diversify our portfolio and expand our investments. I see it as a perfect opportunity to diversify my firm’s portfolio and capitalise on this growth.

Q6: What are the operating metrics used by companies in this industry?

Two main metrics that companies look into are rental yield and also capital gains (as a percentage).

  1. For rental yield – the benchmark is the fixed income market/bond market (so you must do better than that. Because your risk is higher and if your return is lower, might as well put your money in bond markets. For property markets, you must be able to give better returns than the bond market by at least 200bps. In order to get good rental yield, you must be able to attract tenants with solid financial standings and reputations. This can only be done if the development projects are attractive financially and physically.
  2. For capital gains – the industry seeks returns around 15% to 20%, the appreciation of the value of the property from the time of the purchase.

In total (rental yield and capital gains combined), you would want to see returns between 7 to 8% of industry average.

Q7: What moves the market for real estate? Is it a highly cyclical industry?

Definitely. Real estate investment is a highly cyclical industry. Unlike the stock market which moves together with company earnings, property markets are mostly affected by economic fundamentals. Customer sentiments play an important role as well as it influences the demand and eventually supply of the properties. Similarly, income and economic growth shake and shape the industry significantly.

 

Life in the Real Estate Business

Q8: What are the perks of working in the real estate and asset management industry?

For entry-level graduates, the industry offers ample opportunity to immerse in a steep learning curve culture because investment portfolios management requires you to think on your feet, quickly but accurately.

For graduates interested in becoming an agent, the expertise in property management will reward you with attractive commissions and give you the opportunity to enhance on your client management skills.

Ultimately, involvement in real estate investment will reward you high compensations. With high risks involve, high return is definitely expected.

Q9: What about the workplace culture and hours?

The culture here emphasises on creating an intellectually challenging environment for the employees. The environment requires everyone to be on their feet, thinking and strategizing to ensure that the firm gets better returns on each of its investments. I think being proactive also helps in terms of assessing investment opportunities and also existing investments.

One of the main factor in ensuring growth is the economy. The real estate market is essentially a cascading factor. To simplify, when the economy is good, the property market fair good as well. Ultimately, the real estate market is a high return, high risk sector. Hence, one must understand what the cycle that takes place in the sector.

For me, money is good but the ultimate satisfaction comes when I get to make an impact. When good investments are made, your job contributes to the development of communities and nations.

Q10: Any final words of advice?

Start reading about the real estate industry, if you attend an interview expecting just to know the technical jargons but don’t know what exactly is going on, chances are we are not going to take you seriously or you’re just a textbook worm. Getting to know the market allows you to understand it and apply technical knowledge better.


Written By: Muhammad Hafiz bin Adenan

Hafiz is an Associate at Aseanite and he is studying Accounting and Finance at the University of Warwick. He previously worked as a Corporate and Retail Banking Summer Analyst with HSBC UK. An investment and finance enthusiast, Hafiz occasionally writes on the global market for the Market Mogul.


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