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Dubai developer sells Ireland

Just in time for St. Patrick's Day, Dubai developer Nakheel sold Ireland to a group of Irish investors for $38.67 million. It is not the country, but one of 300 artificial islands off the coast of Dubai in the Persian Gulf that together comprise a development called The World.

The group, led by Irish real estate developer O'Dolan International, plans to develop the 225,000 sq. ft. atoll into an Irish-themed resort called “Ireland in the Sun.” Gaelic charms in the 119-unit resort will include a 20,000 sq. ft. pub and thatched roofs but no rain. Daragh Sharkey, managing director for O'Dolan, says his team will have to buy a big hose.

Of the 300 islands in The World, 40% are now sold. Located two miles off the coast of Dubai, the more than 100 million sq. ft. development is arranged to look like a map of the world, and is slated largely for resort and residential development.

Mr. Yang defends his turf in China

For developers with the right connections, business used to be easy in China. Whole neighborhoods could be bulldozed without much fuss.

But people like Yang Wuping, a restaurateur in Chongqing, China, are making it more difficult. Until a recent ban on press coverage, Chinese homeowners were reportedly galvanized by the story of the 54-year-old homeowner who refuses to sell out to a mall developer for what he and his wife say is a pittance. Yang is holding out in spite of the fact that the developer has cut off water, electricity, and dug a huge 30-foot deep pit all around his house.

Mr. Yang is testing the strength of China's new private property law. Passed in March, the new law bolsters residential property rights. Specifically, it clarifies a gray area that had previously existed in the government's privatization program. Since the 1980s, land privatization has been on the basis of a long-term leasehold from the government to the buyer, typically a 70-year lease for residential. What would happen afterward had been unclear, but the new law says the government must keep renewing its leases forever, according to Anna Kalifa, head of research in Beijing for Jones Lang LaSalle.

Middle-class homeowners should benefit from the law, says Ron Schramm, an assistant finance professor at Columbia Business School. For developers, however, the law may make large projects more difficult, although it's likely to take some time before it's enforced everywhere. “I doubt whether that's going to happen overnight,” he says.

At the moment, the Yangs aren't budging one inch, placing confidence instead in their rights — and Mr. Yang's champion-level martial arts skills. “If anyone dares to come up, I'll beat them back down,” Yang told a crowd of onlookers, according to a report in the U.S.-based China Digital Times.

Green Acres

A few decades ago, Yale and a few other university endowments began to look beyond conventional real estate investments toward mineral leases and timberland. Now, some uber-investors are beginning to look at farmland.

Olivier Combastet, founder of Pergam Finance, a Paris-based money management firm that manages a $1 billion portfolio, is bullish on farmland in South America, which he says is 10% to 20% more productive than in Europe or the U.S. “Because [the farmers] have never been subsidized, they are extremely productive,” he says.

Hancock Agricultural Investment Group, an institutional farmland investor with an $865 million portfolio, is also looking south. It has invested $100 million in Australian land, mostly in macadamia nut farms and vineyards. Jeff Conrad, HAIG president, says investors like Australia because the seasonality diversifies their cash flows. It's also on the doorstep of the fast-growing Asian economies.

Combastet invested $30 million in about 49,400 acres of Uruguayan farmland two years ago, and plans to make a $30 million investment in Argentina next year, in partnership with a large ranching family, which operates the farms.

In the past two years, Combastet says, the group has hit its 15% yield target rate. HAIG is running a 12% nominal return, but Conrad expects that to improve.

Investing in farmland is tougher than investing in ordinary real estate in many ways, however, says Combastet. It's hard to buy with leverage, commodity prices are erratic, and there's weather to worry about. On the bright side, you can always change your crops to meet demand.

Bennett Voyles is a veteran commercial real estate reporter and National Real Estate Investor's Paris correspondent. For questions or comments, e-mail [email protected].

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