The purpose of this trip was to participate in the annual China/U.S./South Korea conference, meet with the U.S. Consulate in Hong Kong, attend FIABCI’s Asia-Pacific Real Estate Conference in Osaka and attend meetings with our Japanese bi-lateral partners in Tokyo.

China

Xianxian Ye, NAR staff, met me at the Beijing airport and we flew together to Nanchang, a smaller city in southeastern China of about one million.  The annual three-way conferences have previously been held in Beijing but the China Real Estate Association (CREA) wanted to bring the conference to members outside the major metropolitan areas such as Beijing. 

Following a lengthy history of Jiang Xi province by the Director of the Provisional Real Estate Department, I was given the honor of presenting the initial speech on a subject requested by CREA: Green Building.  Using materials given to me by one of the major U.S. green builders, McStain, as well as information, photos the diagrams from various Internet sites, the hour long (including interpretation) Power Point presentation was filled with graphics.  Beyond a description and illustration of Green Building, my emphasis was on its critical importance in building a sustainable environment planet-wide. 

My audience consisted largely of developers and government officials; by show of hands, there were no builders or brokers.  Based on questions and comments I received afterward, the presentation was very well received and could easily be used again by myself, PLs and others within the IOC “family”.

In addition to the conference, Xian reviewed with me the status of NAR’s real estate training in China.  Not in any order of priority, the following is a description of the current state of the program:

1.      Currently Xian is trying to determine the current status.  Four or five training centers (connected to either the Ministry of Construction or the Ministry of Labor) have already signed agreements to present the training materials and several more are in negotiation to do so.  I do not know the location of these centers but most/many are at local real estate associations.

2.      The materials are based on the GRI with additional Chinese topics/information.  However, at this time, students will not be granted the GRI designation.  International membership in NAR will be available but will not be encouraged as the benefits of such membership require the ability to read English and use the Internet.

3.      The training will be 10-12 days in length and be divided into basic sales training for students with no experience in real estate and advanced training for current agents.  The basic portion is complete but the advanced materials are still being developed.  I do not know who/what is preparing these curriculum materials but it will “take time” to complete.

4.      Instructors are/will be Chinese.  An initial Train-the-Trainer was presented by Mike Brodie of Texas earlier this year; there were eight graduates.  A second group of 15 were trained by professors at a Beijing teacher’s college. 

5.      The trainers are required to pass the same exam as will their student.  However the test is apparently too difficult based on the “high” failure rate among the prospective trainers.  The test is currently being revised as a result.

6.      For the first 500 students, NAR will receive $50 for each student that passes the exam.  Between 501 and 2,000 (I do not know if this is per year or cumulative), the amount will be $40/student.  Xian, conservatively, expects 1,000 students in the first six months, 2,000 in the first year of operation.  China (who???) is estimating 20,000.  Getting the money from the Chinese government to NAR presents some difficulties and Xian is working on finding an appropriate solution.

7.      Each successful student will receive dual certificates: one from the Ministry of Labor which is effectively a license and one from the NAR.  The Ministry of Construction currently requires four to five licenses to operate a company but some cities, mainly Shanghai, have their own licensing program and do not recognize the national licenses.  This is a very confusing situation.

8.      CREA’s role is to facilitate where possible/necessary.  They have recently developed a new Institute of Appraisers and Agents (whose members will be graduates of the training???).

9.      .The current training materials are for agents.  There is no brokerage management training other than a few (how many?) CRB courses that have been offered in China.  Xian and I discussed this issue and I have emailed him the training materials I developed for the two-day brokerage management course I taught in Georgia for IRPF in May, 2005.

10.  Bottom line, training and brokerage in China have a “frontier” aspect…Xian says it’s like the wild, wild west.

Some comments about the current Chinese real estate market:

1. The “government” controls commission rates at a total of 2% resulting in graft by agents.  However, the Ministry of Construction caps commissions at a total of 3%.  In actuality, the rate paid is much lower because of rebates to sellers.
2. Some agents do take exclusive right-to-sell listings.
3. Even large firms have relatively few listings.
4. The government has a department that keeps tract of sales data.  The information can be purchased but is not generally made available to the public.
5. To stem China’s overheated market in which investors, not users were buying and flipping, the government has increased taxes on such transactions.  As a result, the market in Shanghai has dropped by 70%-80% while that in Beijing has dropped by about 50%.  CREA’s Mr. Gu believes that the overheated real estate market will soon be over.

During my “free” time on 9/25, Xian and I toured several sites in Nanchang.  Historically this is a very interesting area as it is the birthplace of Mao’s Red Guard and site of fierce fighting between the Guard and Chiang Kai Shek’s Nationalist army.  On 9/26, Xian arranged for me to take a tour (with interpreter) of the Luzon Mountain area, one of China’s three major summer resorts.  This is an incredibly beautiful area of far vistas, lakes, ancient trees and rocks.  I enjoyed the trip a great deal.

Hong Kong

On September 27^th, Xian and I flew from Nanchang to Hong Kong then took a taxi to the U.S. Consulate in the Central business district for a meeting chaired by Sarah Kemp, the Consulate’s Commercial Consul (sarah.kemp@mail.doc.gov).  Approximately 15 persons, including other U.S. Commercial Service staff, several state (Illinois, North Carolina, California) Asia-Pacific economic development office heads, Xian and myself were in attendance.  The purpose was to do the initial planning for a real estate expo to be sponsored by the Consulate. 

Based on this meeting, several emails with Sarah Kemp since and discussions with Miriam, the following may be true of the Expo.

1. Although the Consulate initially planned to hold the Expo during September 2006, this date will have to be moved to winter or spring of 2007 since MIDEM Asia has scheduled a real estate expo in Hong Kong on 9/26-29/2006.  (Miriam and I met with Christine Law, MIDEM’s Asia representative during the APREC meetings.)
2. The purpose of the Expo will be to highlight high-end investment opportunities in the U.S.  The Consulate sees itself as the “investment manager for China and Asia”.  The Expo will therefore consist of American exhibitors and be attended largely by Asian investors, primarily Chinese and Hong Kongese.  The current goal for the U.S. exhibits is 75% commercial, 25% residential with the addition of various service providers (banks, law firms, etc.).
3. This will be a three-day event (including 1 day of conference activities) which will begin with a “fancy” dinner before the opening at which major portfolios will be presented and major sponsors will speak.  The remainder of the time will consist of the exhibitions, networking opportunities and presentations primarily by Expo sponsors.
4. Demographics of targeted consumers are:
1. Hong Kong and Asian residents with incomes over U.S. $12,000/month
2. Developers
3. Manufacturers expanding into the U.S.
4. Investment funds
5. Two commercial tracks: U.S. $0-10 million and $10 million and above
5. Sponsorship levels will be $50,000 and at least five $10,000 sponsors. 
1. Benefits to the $50,000 “partner” will include invitations to exclusive dinners with top developers & investors, speaking spot at dinners, 2 speaking slots at the conference, main signage and media exposure, materials distributed to all visitors and copy of the attendee list.
2.  Benefits to the $10,000 sponsors include 1 speaking slot at the conference, signage and media exposure, materials handed out to all visitors and copy of the attendees list.

The remainder of the income side of the budget will be consisting of booth rentals.

6. The Expo will probably be held at the new (currently under construction) Four Seasons Hotel (five star quality) which will emphasize the high-end nature of the products exhibited.
7. Recruitment of exhibitors will include: U.S. Consul General letter to U.S. Governors, state agencies that promote investment & economic development, property and investment agents, banks, law firms and other service providers.
8. Marketing to prospective visitors will include attendance at the China Real Estate Entrepreneurs Association in Beijing, mailings (email & snail) of brochures/packets, magazine and newspaper promotions.
9. In terms of the U.S. real estate market, Foreign investment rose by 59% in 2003 and is expected to increase by another 11.9% in 2004.  Commercial real estate had a 4% growth rate and 2.4% ROI in 2005.  For residential real estate, there was a 6% growth rate and 8.8% ROI in 2005.  These numbers are from the Association of Foreign Investors in Real Estate and represent numbers that are very attractive to foreign investors relative to most other countries.

Japan

In Japan, I joined Miriam Lowe, Al & Marguerite Mansell, Annie & Andrew Adams (Mansell’s daughter) and Takashi Misawa.  September 27-30 was spent in Osaka at the FIABCI APREC conference, October 1-2 we were in Kyoto  for R&R and October 2-3 we were in Tokyo for additional meetings capped by the 2^nd Japan-U.S. Summit.  With the exception of Takashi, we all returned to the U.S. on October 4^th.

FIABCI ASIA PACIFIC REAL ESTATE CONGRESS

The Congress was well attended by approximately 500 real estate professionals.  By far the majority was Japanese but many were from other countries in Asia-Pacific as well as the United Kingdom, Nigeria and a few other countries.

We met with the entire leadership team of Zen Ichi (both the local Osaka group and several from their national  headquarters in Tokyo) at their Osaka office building.  After this Zen Ichi hosted us at a 9+ course dinner that resulted in excellent networking opportunities as well as being delightful.

During the Friday conference representative of eight countries, including the U.S., made 20-30 minute presentations about the state of the real estate market in their country.  This was most interesting and some of the materials can easily be incorporated into our some of our CIPS courses, especially some of the summary charts and graphs.

While we were at the APREC meetings, we took the opportunity to meet with Christine Lam, Asia Pacific Regional Director of MIDEM to discuss MIDEM’s first annual Hong Kong Expo.  She told us the following:

1. Their marketing plan is region specific with 60% of the exhibitors/participants coming from Asia and 40% from the rest of the world.  They’re especially focused on Asia’s key developers (about 20) and will be quite selective in their invitations.
2. It will be held September 27-29/2006 at the Hong Kong Convention Center.
3. Because of their view of the Asians, they will have a lot of structure, especially in the conference portion.
4. They’ve booked 1,400-1,500 square meters of floor space for the exhibitions.
5. Christine recently attended an Expo in Beijing; they charged a $1,000 entrance fee and didn’t produce many of the exhibitors they had advertised.
6. They’re confident that GIC, ING and other big investors will attend.
7. The Asian Wall Street Journal has already contacted her for an interview.
8. The other international trade shows are: MIPEM/Cannes in March, Global City in May, Gropa Planning in April and now MIDEM-Asia in September,
9. Christine would like to have NAR involved in hosting a cocktail party, participating in a panel or two, etc.

KYOTO

We traveled by bus to Kyoto and stopped at several temples and gardens upon arrival.  That night we stayed at the Sumiya Hotel, a traditional Japanese Inn…a marvelous .experience!  Perhaps the most interesting part of the Kyoto trip was going to a geisha house that does the initial training of girls 15-20.  Marguerite, Annie, Miriam and I just couldn’t get our heads around the concept…just ask us!

TOKYO

We took the bullet train to Tokyo, arriving late afternoon at the wonderful Hotel Okura.  Takashi had arranged for the red carpet (literally!) treatment which including flying of the American flag.    Throughout our stay, we were treated so very well.

Yukio Yamaoka of Rancho PalasVerdes, California,  the new PL to FRK and RECAJ met us at the Okura on the 2^nd, joined us for dinner, sat in on Al’s three interviews with Japanese media the morning of the 3^rd  (and assisted occasionally in the interpretation) and attended the Japan-U.S. Summit on the night of the 3^rd.  He was briefly introduced at this last event but will need to be more completely introduced to FRK/RECAJ leadership at another time.   I’ve asked Takashi to be sure this happens.

During the afternoon of the 3^rd, we visited Recruit, the securitization association, three professors from Meikai University and the national headquarters of Zen Ichi. 

Recruit is a very large organization that provides support, especially media support, to a number of industries, including real estate.  They print seven or eight real estate (for sale, for rent, second home/resort properties, etc.) large catalogs every other week.  Some are free to the public, others can be bought on the newsstand.  They also have a national web site and a mobile phone data download facility.  They’ve attended NAR conventions for several years and will be in San Francisco.  As they’re now interested in providing NAR designation education, they’d like us to arrange several meetings for them.  I’ll contact CRS, Miriam will contact REBAC as well as have International staff discuss an international GRI with them.  Recruit works closely with several of the Japanese real estate associations and, as a result, seems to be a good match.  Any education presented in Japan would need to be taught in Japanese which means any of NAR’s institutes, societies and councils would need to develop a train-the-trainer plan.

Regarding securitization, this has become a major financing tool for major commercial projects very similar to U.S. REITs.

The Meikai professors wanted to discuss how the U.S. provides sales data as the Japanese government has decided that publicly available sales data could prevent a future bubble like the one that happened 15 years ago.  Our answers obviously were that there are many ways this is done as it varies from state to state.  Al stressed the MLS as the most accurate source, especially NAR’s new Pending Sales Data Index.

Our meeting at Zen Ichi’s headquarters was a courtesy call with photographs and gift giving.

The Japan-U.S. Summit was a meeting of the top leadership of Japan’s four major real estate associations and the NAR.   After introductions, each organization described their association and outlook for the future.  As most of them had attended APREC, Al spent his time explaining in a very clear fashion why he/NAR believes that there is no real estate bubble that will break.  The Japanese were quite appreciative of his remarks.

After the Summit, we had a most elegant and delightful dinner with a great deal of discussion both business and fun; it was one of the best networking events in my experience.

Bottom line, I was able to cover a great deal of territory both in terms of land and people. 
Although initially I was somewhat reluctant to attend the APREC meeting, coming to Osaka provided me with the opportunity for many other meetings that proved most valuable.