Firm had planned to list REIT with Qatari hotels worth about $1bn
Property fund manager ARA Asset Management has put on hold
plans to list a Qatar REIT in Singapore but is confident it will be able to
raise $1bn for a China fund that will invest in commercial real estate, its CEO
said on Thursday.
ARA, part-owned by Hong Kong property giant Cheung Kong,
currently manages about S$18.8bn ($15.4bn) in real estate assets. It had
planned to list a REIT with Qatari hotels and serviced residences worth about
$1bn but has shelved the idea for now.
"We've put that temporarily on hold because of
geopolitical issues in the Middle East and North Africa, but that will come
back once things have settled," said ARA's CEO John Lim.
Investors, however, remain optimistic about the long-term
prospects for real estate in China, and Lim said ARA has already secured $300m in
commitments for a planned $1bn China fund.
The fund, called the Asian Dragon Fund (ADF) II, will start
investing in the fourth quarter and expects to hit the $1bn target by March
"The world is uncertain with the European, US issues.
But my sense is that China will continue to be the growth engine for the world,
and that's where our focus will continue to be, along with Singapore, Hong Kong
and Malaysia," Lim said.
"China as a whole, is switching its economic model from
export to domestic consumption. The key thing is urbanisation and as people get
more affluent, people want a better shopping environment," he said, adding
ARA sees strong demand for shopping centres in China.
Lim said ADF II will focus mainly on larger cities in
central and western China, citing Chongqing and Xi'an as examples.
"There's a lot of fiscal spending in infrastructure in
that area. Growth is quite significant there and costs, such as wages, land
value, construction costs, are relatively cheaper there compared to coastal
cities," he said.
Looking ahead, Lim said ARA plans to raise assets under management
by an average of S$2bn ($1.6bn) a year over the next five years.
He added that ARA's flagship $1.1 billion Asia Dragon Fund
I, which was established in 2007, is on track to deliver its targeted annual
return of 20 percent, Lim said.
"Of the assets held by ADF I, there may be potential to
establish a new Malaysia retail REIT and a new China commercial REIT,"
Bank of Americal Merrill Lynch said in a recent report on ARA.
The U.S. bank has a buy rating on ARA with a target price of
S$1.85. ARA was last traded at S$1.345.
ARA currently manages six listed REITs, including
Singapore-listed Suntec REIT and Hong Kong-listed Hui Xian REIT , a
yuan-denominated trust backed by Cheung Kong which is the flagship property
firm of Hong Kong tycoon Li Ka-shing.