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Mongolia Real Estate In Businessweek

Jul. 07, 2013 3:14 PM ETMNGGF
John Polomny profile picture
John Polomny's Blog
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Also CEO of Mongolia Growth Group is quoted. Here are the highlights:

Commercial real estate rents in Ulaanbaatar will more than triple within five years as increases in per-capita incomes lure international companies, said Harris Kupperman, who runs a fund that invests in Mongolian properties.

Rental prices for the capital's main commercial strip, Peace Avenue, will top $100 per square meter per month by 2018, up from as much as $30 currently, said Kupperman, the chief executive officer of Canadian company Mongolia Growth Group (YAK), the only non-mining internationally listed company that does business in Mongolia.

"It starts with food and beverage, but eventually you are going to have more retail, too," Kupperman, 32, whose company owns retail space in the Peace Avenue business corridor, said in an interview in Ulaanbaatar July 3. "You get 10-year leases signed by high-quality tenants and they add value to the property. They pay their rent on time, so it increases the value, and they tend to pay above market for top locations."

A new central bank policy that allows homeowners to refinance their mortgage loans down to 8 percent from 15 percent to 20 percent and extend the loan period to 20 years from an average of five years was helping boost consumer power, Kupperman said.

"This will reduce payments by 70 to 80 percent," he said. "It is going to put a lot more money in the economy. With more money, they are going to go shopping, which will be good for retail and good for commercial real estate."

The subsidizing of mortgages will possibly lead to a bubble in real estate. However that is a way down the road. In the interim the thesis should continue to play out. Lower house payments lead to more disposable income which leads to more retail spending and the entrance of more western brands that will pay higher rents. Mongolia Growth Group shares dropped below $3.00 before recovering. I was buying. Values and rents keep going up. Mongolia is currently out of favor due to the perceived bad news of Oyu Tolgoi so valuations are low. They will not stay there.

Disclosure: I am long OTCPK:MNGGF.

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