It is eyeing at least one real estate investment trust listing a year over the next four to five years, reports ANDREA TAN
HONG KONG tycoon Li Ka-shing's ARA Asset Management wants to be one of the largest real estate investment trust (Reit) managers in Asia. To achieve that, it is eyeing at least one trust listing a year over the next four to five years, including the first cross-border China Reit in 2005. 'We want to be one of the largest Reit managers in Asia, ex Australia,' ARA CEO John Lim told BT in a recent interview. 'Our experience in Fortune Reit and, more importantly, our association with Cheung Kong and the recent developments in China will help. We want to do at least one Reit a year for the next 4-5 years.' Last year, ARA did Fortune Reit, this year the mega Suntec City Reit. In the first half of next year, a China retail mall trust is being planned.
Mr Lim was silent on the impending Suntec City Reit but was keen to talk about the China retail trust. 'This will be the first cross-border China Reit. We are looking at a very good size IPO of about US$200-250 million with a yield of 8-10 per cent,' he said. ARA is now doing its due diligence on four malls in Beijing, Guangzhou and Tianjin with a total floor area of up to 8.5 million sq ft. The due diligence will be completed by January and not all malls may be injected into the Reit, Mr Lim said. The malls belong to a consortium of three developers. Credit Suisse First Boston (CSFB) will be the lead manager for the IPO.
CSFB's vice-president David Moritz said: 'The Chinese parties were very keen to work with ARA because it is one of the largest and fastest-growing Reit managers in Asia, has experience in cross-border structures and because of the speed at which they work. There is increased activity in Reits in Singapore, Malaysia and China. In Singapore, it is because of the enhanced tax transparency, in Malaysia, the revised Reit regulations are now more favourable, while the tightening of lending by banks in China will create a need for developers to figure ways to monetise their property assets.'
Mr Li's Cheung Kong, Hong Kong's real estate giant, is not linked to any of the three developers, ARA's Mr Lim said. ARA is a joint venture between Cheung Kong and Mr Lim. The China retail Reit is likely to be listed in Singapore or Hong Kong. 'We like Singapore, the experience of Fortune being listed here, and the full support of the authorities,' he said. 'Hong Kong we will study and see how it reacts to Reits as a product.' Singapore poses one challenge, however. Listings in renminbi are not allowed and the China Reit will most likely be listed in US dollar, which entails a currency risk.
Mr Lim said the China Reits will focus on acquiring malls in Beijing, Guangzhou, Tianjin, Shanghai and Chongqing as its growth strategy and ARA plans to have assets under management of US$1-2 billion in 3-4 years. 'China's a huge market, especially the key cities. The Chinese are also getting very affluent and retail trades are doing well,' Mr Lim said. 'The China government's tightening of credit has also helped us, as developers are now trying to divest their properties to get cash. This has offered us tremendous opportunities to talk to developers for good quality malls. It's also a good chance for investors to participate in the opaque Chinese market because the Reit is a very transparent instrument.' ARA wants to manage listed property trusts in the region in particular Singapore, Hong Kong and China. 'Malaysia, sure, we're keen but so far no one has approached us and we've our plates full to go after them just yet,' Mr Lim said. 'You need a brave person there to do the first Reit before the rest will emerge just like what we did with Fortune. You can expect more cross-border Reits.
'Hong Kong would be the next Reit after the China retail Reit when the market there matures but we don't have a time frame. It could be 2005 or 2006,' Mr Lim said. 'But who knows we may set up an industrial Reit in China first, which has an attractive property yield of 12-14 per cent.'
To spearhead ARA's Reit ambitions, Mr Lim has brought in Quek Kar Tung, former chief financial officer of Raffles Holdings and former deputy CEO of the Singapore International Monetary Exchange. 'I was trying to market a pan-Asian Reit in The Netherlands to ARA and ended up joining ARA instead, when I realised that it was at the forefront of the Reit scene,' Mr Quek said.
Apart from managing Reits, ARA also runs private funds, including the Al Islamic Far Eastern Real Estate Fund which claims it's the first such fund set up in Asia. The target for private funds has been set at US$1 billion within 3 years. Mr Lim has said he plans to list ARA in three years and to manage assets of $4-5 billion.
ARA is working with an American real estate fund in China to provide mezzanine financing to developers there. It hopes to raise US$100-150 million in Q1, 2005.
ARA's listed trust plans will rival those of property giant CapitaLand which has two Reits so far - CapitaMall Trust and CapitaCommercial Trust. CapitaLand is also the trust manager for Hong Kong's Housing Authority Reit - the world's largest initial public offering for a Reit raising HK$20 billion.
