ARA plans China, India, Japan property funds

SINGAPORE: Singapore property fund manager ARA Asset Management said yesterday it plans to launch country-focused funds for China, India and Japan to take advantage of declining real estate prices that it expects will bottom in late 2009.

ARA, partly owned by Hong Kong tycoon Li Ka-shing's Cheung Kong (Holdings), would also consider taking its listed real estate investment trusts (REITs) private if share prices remained weak, group chief executive officer John Lim said in an interview.

"In terms of deal flows, we see more opportunities coming up," he said in reference to properties that are being offered at reduced prices. Credit markets have also loosened from October-November last year in that bankers were now willing to consider proposals from investors such as ARA, he added.

Asian property prices have fallen sharply since the middle of last year, and listed developers and property trusts in Asia excluding Japan are now trading around 30 per cent below net asset values, JPMorgan said in a report on Monday.
Suntec REIT, which owns office and retail space in Singapore's central business district and is the largest of four listed property trusts managed by ARA, was last traded around S$0.815 (S$1 = RM2.38) a unit - less than half its value at the start of 2008.

"As a responsible manager, we always explore all options (and) privatisation is one of the options," Lim said when asked about the fall in REIT prices.

Besides Suntec, ARA also manages Fortune REIT in Singapore, Prosperity REIT in Hong Kong and AmFIRST REIT in Malaysia along with several privately held funds.

Lim also said that although office rents in Singapore have fallen from the highs reached in the middle of 2008, most tenants renewing leases this year would have to pay higher rates as current rents are still more expensive than three to four years ago.

"It has to be. Most of the leases were signed in 2005, 2006. Our average passing rent is S$6.50 per sq ft and rentals in the Suntec area are still achieving S$10 psf," he said.

Looking ahead, Lim said ARA hoped to launch country-specific closed-end funds that will invest in China, India and Japan to buy assets near the bottom of the property cycle.

The firm hoped to raise a minimum of US$500 million (US$1 = RM3.50) for each fund, he said.

ARA's flagship Asia Dragon Fund, which on Monday bought a 51-storey office-cum-retail building in Nanjing, China, for about S$340 million, has more than US$1 billion available for new investment.

The fund plans to focus on China, Hong Kong and Singapore, fund director Ng Beng Tiong said.

By Reuters