Macquarie Group Ltd and Eureka Funds Management - Case Study Example

INTERNATIONAL BUSINESS By Name Course Instructor Institution City/State Date International Business Introduction The primary utilisation of the idiom global cash flow has developed and long-drawn-out into international analysis, which includes details pertaining to the sponsor's international fiscal status, plus revenue, cash flow, liquidity, dependent liabilities as well as other pertinent aspects such as credit ratings (Roberts & Dörrenbächer, 2012, p.7). Knight and Kim (2009) claims that global cash flow is merely a piece of the enigma, and possibly the misplaced connection in the entire procedure is an examination of dependent liabilities away from an undemanding catalogue of different individual assurances on credits. More than expected, the Australian global cash flow has answered for any cash outflows or inflows flanked by the entity as well as different property projects or other commercial holdings, but there are some risks that make loan guarantees (indirect liabilities) turn out to be direct liabilities within the quick-fix (Shao-Chi et al., 2007, p.125). In the last three decades, Australia’s international investment has picked up the pace at a magnificent rate and moves in the stream of this investment are at the moment reshaping the international financial setting. Australia has observed private international direct investment supply more or less triple across the globe in the past ten years, and that seizes factual for developed economies as well as developing countries (Kirkham, 2012, p.2). At present over 75,000 international companies are in service across the globe with over 750,000 overseas associates in contrast to 40,000 international companies and 165,000 overseas associates lively in 1993 (Iqbal et al., 2012, p.556). Basically, Australia’s foreign investors bring new resources, expertise, concepts competitive spirit as well as jobs. Statistically, they employ almost 80 million individuals across the globe, a number that is approximately two times the dimension of Germany’s labour pool as well as one that has grown four times in the previous three decades. What’s more, these foreign associates tip to a profound echelon of fiscal amalgamation in the midst of countries. Furthermore, they exhibit a rationale and obligation afar one-time market entry or transactions into entrenched trade paradigms. Novel investment in Australia not only steers modernism and jobs, but it as well progressively steers trade (Hipsher, 2006, p.124). According to Saminather and Somasundaram (2013), Macquarie Group Ltd. (MQG), which is a Australia’s largest investment bank, plans to purchase Australian commercial property at a record breaking price, which is providing a comparatively towering productivity as well as protected cash flows. Based on the article, the bank set a sum of $3.8 billion of sovereign wealth fund and foreign pension investment for Australia’s property between 2012 and this year, which statistically is a global record since the bank begun property’s private capital business ten years ago.. On the other hand, The Australian newspaper reported that Eureka Funds Management, which is a in wholesale specialist is completing an estimated $700 million worth of property transactions as it continues to take advantage of the foreign investment tide pursuing Australian office towers as well as hotels (TheAustralian, 2013). Pursuant to its $340m record-breaking deal with Mirae Asset Global Investments of South Korea for the Four Seasons Hotel Sydney, Eureka Funds Management collaborated with AXA Real Estate Investment to purchase Australia NSW headquarters. MQG management are of the opinion that enormous pension and sovereign wealth funds encompass incredibly enormous, increasing amounts of capital; thus, they want to allot a considerable fraction to property. Arguably, the bank helped European fund with Australia’s business privatisation, real estate mutual undertakings in UK and India as well as assets in Chinese car parks and US multifamily real estates. Billowing desire from Australia investors for elevated profits in the course of stumpy bond yields internationally is steering up profit-making property significance worldwide (Saminather & Somasundaram, 2013). Economic statistics point out that the international trade property index of CBRE Group went up by 6.5% in a period of three months, whereas the retail property index of the group increased by 6%. What’s more, Saminather and Somasundaram (2013) report that Australian commercial property provided 9.1% total returns with roughly 80% of that from profits and the remaining from value escalation. This is contrasted with total income UK properties’ 5.5% between august 2012 and august 2013, Canada’s 7.2% between june-2012 and june-2013 as well as Japanese properties’ 4.5% between May 2012 and May 2013. Internationally, Macquarie assets fulfilled property deals worth A$3.4 billion the previous year and has by now surpassed A$3.7 billion, with the successful deals in both years standing at eight. Saminather and Somasundaram (2013) reported that investors more and more have a preference to carry out enormous transactions with fewer managers. Currently, MQG are as well shifting more breath-taking investments, which entails properties of low-quality, which require some renovation or even improvement, as values at the top end surge. MQG has enormously improved the status of Australia’s economy as far as international business is concerned, given that Macquarie's largest deals was the Charter Hall Office Reit privatisation based in Sydney at a cost of A$1.9 billion, which was completed last year in April. Other deals include 2012, September raising worth A$500 million from Abu Dhabi Investment Corp for Japan-based warehouses investment in collaboration with Goodman Group and the Australian shopping mall split and restructure worth A$1.75 billion, which was a multiparty undertaking flanked by AMP Capital and Westfield Group (Saminather & Somasundaram, 2013). On the other hand, the chief executive of AXA believes that the purchase will bring an international giant into Australian market: furthermore, this move will offer Australia with disclosure to a novel area as well as permit AXA’s clients to gain from their international asset and investment administration knowledge integrated with that of Australia’s Eureka asset manager. Besides that, the global fund manager that endorses itself as the world's second major property fund organization, eased up an enormous venture into the Australian property market some years ago and has been seen as a possible purchaser of the Eureka funds management company (TheAustralian, 2013). The Australian reports that Eureka has for decades down played this aspect as it has tied knots to retirement benefit fund customers as well as conceits itself on its self-determination. Rather it has mutually worked with AXA RE on moving into the competitive Australian market. AXA RE and Eureka management even completed a play for an almost $1 billion fund, which initially the local insurance arm of AXA regulated prior to it being passed to AMP Capital. According to The Australian newspaper, AXA RE's ultimate entry point was the Australia Post acquisition, which was valued at $168m for the renovation works and land. Niall McCarthy who is Eureka director posited that Eureka Company is pleased to purchase such quality asset with their affiliate AXA, which helped them to cement a lasting association with a high-class lessee like Australia Post (TheAustralian, 2013). What’s more, Australia Post disclosed strategy for a redevelopment to renovate the construction into a high-tech business headquarters as well has dedicated a decade and half head lease with the work projected to be finished mid 2014. Interestingly, the completed edifice will occupy in excess of 29,000sq m of total leasable quarter while the Australia Post will dwell in roughly one-third of the building, next to occupants who will include NSW government agencies (TheAustralian, 2013). The management of Australia Post was delighted with the sale of one of their most iconic assets, which surpassed their anticipations, enhanced by the site, the past as well as their intended unending relationship with the structure. Besides that, the value projected an output of roughly 7.4%, which exhibits the inflexible competition for first-class Sydney-based fringe establishments. An additional output reduction is anticipated as China Investment Corporation completes their acquisition of roughly $300m Centennial Plaza. The brokers who successfully made the transaction happen claimed that the sale to Eureka was a huge upshot for Australia Post offered with the speedy turnaround as well as the diminutive payment. Furthermore, there is undoubtedly well-built enthusiasm in the market for superior well-rented real estates. Individually, Eureka is in a key situation to purchase $180m Melbourne-based 485 La Trobe Street from the Fudo Capital II private equity property administered by CLSA. On the other hand, Colliers International and CBRE, which are currently handling the procuring process, have refused to complement about the process, while another two agencies are competing for 20 Hunter Street office located in Sydney. Moreover, Eureka gained applauses from investors for trading its Sydney hotel for a record-breaking price, but still it endures challenges in providing novel hotel artefacts as the segment encompasses a chequered reputation. Nevertheless, firm profits produced by Eureka as well as the Tourism Asset Holdings transaction might assist elevate opinion (TheAustralian, 2013). In Australia MQG as well as Eureka foreign investment has contributed more considerably to the financial affluence, however, policies intended to promote, defend and completely gain from it need a lot of concentration. These consist of enhancements to the investment environment that will draw superior flows, less assailable intellectual property rights security, as well as enhanced financier aftercare and difference of opinion deterrence (Dumi et al., 2012, p.253). A hastily shifting global investment setting will bring about a lot of novel opportunities and setbacks to the government, local companies as well as the citizens. The government’s capacity to avert or lessen economic crises as well has an enormous effect on the capital flows the intensification. For this reason, Australia federal government can pursue the following steps to deal with any looming crisis: intensifying banking management, ensuring more clearness in global financial deals, lessening the threat of ethical vulnerability, and guarantee sufficient monitoring and control of fiscal markets. Akisik and Pfeiffer (2009) suggested other steps to assist in restricting the capacity of unpredictable quick-fix capital like minute taxes on international exchange deals. Even though nearly all nations have enforced taxes or limits on assets outflows, an additional resourceful manner to deal with volatility was used by Chile, whereby they imposed a miniature business fee for capital inflows. Virani (2012) believes that this measure was imposed to restrict the amount of temporary investment which in my view can work properly in Australia, since it does not generate threat of deep concern to foreign investors (MQG and Eureka), that is to say having difficulty in getting their capital out of Australia sometime in the future. Australia government search for balance-of-payments constancy and fiscal development, and both objectives can be practiced by drawing and channelling the operations of foreign international companies. MQG and Eureka companies hunt for low-priced properties as well as production sites and markets to sell their artefacts; they can chase those goals by dealing productively with Australian government, which, through its independence, regulate access to all of these aspects (Yin, 2013, p.36). The complete array of negotiating advantages owned by local companies as well as federal government can never be defined, given that it relies to a certain extent on the distinctive attributes of Australian government and private and public companies. Soper et al. (2012) believe that the relative resources accessible to the foreign investor and local companies in the bargaining procedure place the primary positions, but the power of government arises fundamentally from regulation over the normal targets of foreign international companies: either the Australian market or factors of production like low-cost workforce, raw materials, capital or technology. The outlined benefits are essential, given that with no either a basis of supply or an attractive market, the federal government does not usually provide a significant chance to foreign international companies. Correspondingly, international companies often have a number of aspects that catch the attention of the host government, and through which the host government may fail to acquire a much superior price through different means (Yuksel & Yuksel-Mermod, 2010, p.5). Such aspects entails: helping in raising Australia’s profits and job by means of production, extractive service or projects, which make use of the company’s proprietary expertise and/ or management familiarity; enhancement of the Australia’s balance of payments by offering access to international markets and supply sources that the company possess through its personal associates or through its own data channels. Conclusion In conclusion, investment by Macquarie Group Ltd as well as Eureka funds management will help the Australian government to achieve both economic and non-economic objectives, like social and political stability. The significance of all such factors in a bargaining state of affairs enormously establishes the silhouette of the anticipated result of negotiations between the foreign company and the host country. Investment by both companies, will undoubtedly improve the economic status if Australia and its citizens. References Akisik, O. & Pfeiffer, R., 2009. Globalization, US foreign investments and accounting standards. Review of Accounting & Finance, 8(4), pp.5-37. Dumi, A., Memeti, F. & Qazimi, J., 2012. The Influences of Foreign Direct Investments, the Economic Advantages Offering in Macedonian Economy: An overview of foreign organizations activities. Mediterranean Journal of Social Sciences, 3(3), pp.251-56. Hipsher, S.A., 2006. Re-evaluation of underlying assumptions and refocusing of objectives in criticisms of international business. critical perspectives on international business, 2(2), pp.114-27. Iqbal, S.M.J., Muneer, S., Jahanzeb, A. & Saif-ur-Rehman, 2012. 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Investment opportunities, free cash flow, and stock valuation effects of secured debt offerings. Review of Quantitative Finance and Accounting, 28(2), pp.123-45. Soper, D.S., Demirkan, H., Goul, M. & St Louis, R., 2012. An Empirical Examination of the Impact of ICT Investments on Future Levels of Institutionalized Democracy and Foreign Direct Investment in Emerging Societies. Journal of the Association for Information Systems, 13(3), pp.116-49. TheAustralian, 2013. Eureka taps global investors. [Online] Available at: http://www.theaustralian.com.au/business/property/eureka-taps-global-investors/story-fn9656lz-1226717199473 [Accessed 2 October 2013]. Virani, V., 2012. Impact of Foreign Institutional Investments on Equity Stock Market of India. Sumedha Journal of Management, 1(3), pp.101-19. Yin, Y., 2013. Cointegration Analysis and ECM of Industrial Economy and Direct Foreign Investments of China. Business, suppl. Supplement, 5(1B), pp.35-38. Yuksel, U. & Yuksel-Mermod, A., 2010. A Risky Mode Of Foreign Market Entry: International Portfolio Investments. Journal of Business & Economics Research, 8(8), pp.1-10. Read More