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Mongolia Growth Group Ltd. Publishes March 2013 Monthly Letter to Shareholders
Mongolia Growth Group Ltd. Publishes March 2013 Monthly Letter to Shareholders Ulaanbaatar, ...
About this update from Mongolia Growth Group Ltd.
[{"type":"text","content":"\nMongolia Growth Group Ltd. Publishes March 2013 Monthly Letter to Shareholders\n\nMongolia Growth Group Ltd. Publishes March 2013 Monthly Letter to Shareholders\nUlaanbaatar, MONGOLIA, April 17, 2013 /FSC/ - Mongolia Growth Group Ltd. (YAK - TSX Venture), is pleased to announce the release of its March 2013 letter to shareholders.\nMarch 2013 Shareholder Letter\nTo the Shareholders of Mongolia Growth Group Ltd.,\nI am now in Ulaanbaatar watching as the snow slowly melts away. With the warmer temperatures, leasing activity is beginning to pick up. Once again, we are seeing increases in rents as the 2013 season begins. Just as interestingly, we see very robust demand for high quality locations. \nIf you look at why real estate investment in an emerging economy is so successful, there are really two drivers to increasing valuations. The first driver-the one that is very important in the earlier stage of a country's development-is the rapid increase in rents due to a growing economy. We have already witnessed this in many ways over the past two years-in very rough terms, retail rents in downtown have effectively doubled while office rents aren't very far behind that. While, office rents will eventually top out due to increases in supply, our research shows that retail rents should continue to increase with the increase in disposable income created by a booming economy.\nThe other factor in property price appreciation, which shows up later in the cycle, is the creation of a strong banking sector and mortgage market. For a point of reference, today in Ulaanbaatar, if you want to borrow US Dollars they will cost you nearly 20% while Mongolian Togrog will cost you over 25% a year. In addition, it is difficult to get mortgages that are longer than a few years in duration. Clearly, this is the reason for mid-teen yields on premium stabilized assets-with many second tier assets valued at over 20% yields. In the past few months, we have seen a number of data points that would make us believe that interest rates may have begun to decline and lead to this second leg of price appreciation becoming relevant.\nIn 2012, the Mongolian government raised $1.5 billion at interest rates of 4.125% for $0.5 billion and 5.125% for $1.0 billion. This money is now filtering into the economy as the government chooses various programs to finance. For a cou...