MPO Fund anticipating ‘steady’ recovery

London-listed Macau Property Opportunities Fund Ltd. (MPO), managed by property investment manager Sniper Capital Limited, is bullish about the recovery of the city’s luxury property market, while it saw occupancy in its high-end residential projects in the MSAR increase during the first quarter of this year triggered by the comeback of high rollers.
According to the Fund’s latest investor update, its adjusted net asset value grew 1.3 per cent for the last quarter of 2016, amounting to US$231.2 million (MOP1.85 billion) for its third consecutive quarterly increase. Meanwhile, the value of its portfolio rose by 1.7 per cent quarter-on-quarter to US$405 million.
As at the end of March this year, the occupancy level at The Waterside – the Tower Six of high-end residential project One Central Residences on the Macau Peninsula – rose 10 percentage points quarter-to-quarter to 59 per cent, the company said.
‘The improvement was aided primarily by a revival in the VIP junket market and attractive commission packages introduced to incentivise third-party property agents,’ it explained.
Despite the increase in occupancy, the average monthly rental rate of the residence dropped by three per cent quarter-to-quarter to HK$17.42 per square foot.
Nevertheless, the company believes the upcoming openings of two more casino-resorts in the MSAR may help turn the situation around.
‘We believe the soon-to-open MGM Cotai in Q3 2017 and the Grand Lisboa Palace in 2018 will draw more senior level expatriates to Macau, which in turn is likely to drive leasing demand for high-end residential properties,’ the company wrote in the report.
According to the Fund, it also sold one of its four remaining individual units at One Central residences for US$5 million during the first quarter of the year, with a sale return amounting to 65 per cent.
For another project on Penha Hill – The Fountainside – the company said residential sales continued on ‘an upward trend’ during the first three months of the year, noting customer viewings of the project had surged 40 per cent in the period.
‘Sales of mid to high-end properties, however, remained quiet due to the continued imposition of a 50 per cent loan-to-value cap by the government on properties valued at more than US$1 million,’ it said.

Recovery amid uncertainty
‘We continue to expect a slow but steady recovery in Macau’s property values, which should lead to the strengthening of the luxury segment as confidence improves,’ the company notes in its report.
However, it is worried that global uncertainties, such as further U.S. Fed rate hikes, appreciation of the U.S. dollar, and tightening capital outflow controls by China, will ‘lead to higher borrowing cost for homebuyers and weigh on gaming revenues . . . Nevertheless, we believe the upcoming infrastructure developments, favourable Chinese central government policies and stable fundamentals will continue to support the attractiveness of Macau as an investment destination.’
Meanwhile, the company said its receipt of approval to proceed to the final stage of the planning process for its ‘Senado Square’ project ‘has increased the attractiveness of the site to potential buyers.’
‘We are progressing to the detailed planning application stage and will continue to engage with the relevant authorities to ensure smooth progress in obtaining approvals,’ the firm wrote.
The new development will offer 67,800 square feet of space for retail and food and beverage businesses.