ARA Asset Management Ltd., a manager of real estate investment trusts partly owned by billionaire Li Ka-shing, and Straits Trading Co., agreed to jointly invest in property funds.
Straits Trading will acquire a 20.1 percent stake in ARA for S$294.4 million ($238 million) from Li’s Cheung Kong Investment Co. and ARA Chief Executive Officer John Lim in cash and shares, making it the biggest shareholder, the company said in a statement. Straits Trading, a Singapore-based tin-smelting company, will also form a new company with Lim that will undertake property investments, excluding hospitality assets, with capital commitment of as much as S$950 million, it said.
ARA said in March that it plans to double assets under management over five years as its private funds buy more properties. With six REITs listed in Singapore, Hong Kong and Malaysia, the Singapore-based company plans to expand with acquisitions and enhance existing properties, Lim said in an interview in March.
“The alliance will allow us to expand our suite of fund platforms even more rapidly,” Lim said at a press conference in Singapore today, adding that assets under management in the new investment fund will climb to S$10 billion over time.
Lim will hold 19.25 percent of ARA after the transaction, while Li’s Cheung Kong will own 7.84 percent, according to the statement.
The new joint company will have initial capital of S$200 million, according to the statement. The deal is subject to regulatory approval, it said.
ARA will manage Straits Trading’s investment property portfolio as a separate account, according to the statement. The property portfolio, which includes an office tower in the island-state’s central business district and some residential assets, was valued at S$819.4 million according to a report by Knight Frank Pte in February.
With the alliance, ARA’s total assets could climb to S$40 billion from about S$23 billion now, Lim said today.
ARA’s shares rose 0.3 percent to S$1.75 in Singapore trading on Oct. 25 before it was halted for trading today, pending the announcement. The stock has gained 19 percent this year, while the the FTSE Strait Times Real Estate Investment, tracking the city’s REITs, has declined 4.7 percent.
Straits Trading agreed earlier this year to sell its Rendezvous Grand Hotel Singapore and Rendezvous Gallery to Far East Hospitality Trust. The company has also tied up with Far East Orchard Ltd. to manage hotels in Australia. Straits Trading will hold a 30 percent stake in the hospitality joint-venture, according to a presentation in July.
In May, Straits Trading accepted United Engineers Ltd.’s higher bid for its 44.58 percent stake in WBL Corp. It obtained gross cash proceeds of S$508.8 million from the sale, according to a June presentation by the company
Straits Trading shares rose 1.4 percent to S$3.65 on Oct. 24 in Singapore trading, before also being halted for trading today. The shares have fallen 1.4 percent this year.