Straits Trading seeks to emulate Blackstone for property funds

Straits Trading, an investor in Singapore’s biggest publicly traded property trust manager, is planning “Blackstone-like” funds as Asia’s appetite for real estate investments increases.

Straits Trading last month invested in Singapore-listed ARA Asset Management, the property trust manager partly owned by billionaire Li Ka-shing, and set up a joint venture with ARA’s CEO John Lim to invest in property funds.

The funds, with an eight-to-10-year time frame, will seek to follow the model of Blackstone Group, the world’s biggest manager of alternative assets including real estate, according to Ms Chew Gek Khim, Executive Chairman of Straits Trading.

“Why can’t we have the equivalent of a Blackstone in Asia? You have the money, you buy the real estate, you REIT it, you exit,” she said in an interview on Thursday. “We have not seen this done in Asia before. There’s a market for it.”

Under the agreement with ARA, Singapore-based Straits Trading will buy a 20.1 per cent stake in the trust manager for S$294.4 million in cash and shares from Mr Li’s Cheung Kong Investment and Mr Lim. The transaction will make Straits Trading the biggest shareholder of ARA.

The Blackstone-style funds will be created through the new company formed with Mr Lim, and the venture will have capital commitment of as much as S$950 million, according to the announcement last month.

“The key will be on execution,” UOB Kay Hian analyst Terence Khi said. “ARA’s focus is shifting away from launching new REITs towards private funds due to the impact of tapering and increased competition.”

REITs have raised US$2.7 billion (S$3.4 billion) through initial public offerings in Singapore, about a third of all REIT IPOs in the Asia-Pacific this year, according to Bloomberg data.

The creation of new REITs comes as the number of retirees increase in the region, boosting demand for investments that offer a stable dividend. The number of people who will exceed the age of 60 will reach 463.1 million by 2017, up from 391.3 million last year, according to data compiled by Ageing Asia. “Logically, there should be a demand for REITs in Asia,” Ms Chew said. “We have an ageing population and REITs are a very steady form of income.”

The joint venture is still deciding on where the new properties will be located. Other than Singapore, the funds may seek investments in properties in Europe, Malaysia and Australia, she said.

Source : Today – 23 Nov 2013

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