ARA Asset Mgt

ARA Asset Mgt: Takeaways from CEO John Lim’s interview with Bloomberg. ARA, a manager of real estate trusts partly owned by billionaire Li Ka-Shing, wants to double assets under management (AUM) over five years as its private funds buy more properties. ARA, which manages ~$22.1 of assets through REITs and funds, plans to expand with acquisitions and enhancing existing properties. In particular, its real estate funds, which make up less than a third of assets, are expected to increase to half in five years. Mr Lim believes there is “more potential” on the private markets side; if the group can increase AUM, “then the share price will continue to grow.” California Public Employees’ Retirement System, or Calpers, the largest U.S. pension fund, and Teacher Retirement System of Texas have invested in the funds, with Japanese and Korean funds as potential sources of capital. On the Rmb 5.4b IPO of Dynasty REIT which ARA cancelled in Oct ’12, amid sluggish demand for new equity, ARA says it is still being considered. Nevertheless, while launching new REITs is “good”, Mr Lim prefers to grow its current REITs. He expects stock prices of S-REITs to rise by about 20-30% this year, as the spread between their dividends and the Singapore government’s 10-year bonds narrow. The bonds yield 1.55%, while the Singapore REIT index trades with a 4.7% yield. Lim says, a 200 bps spread would be “reasonable”, citing averages for markets including the U.S., U.K. and Australia. ARA plans to expand into new markets like Japan, Australia and India, as well as SE countries including Indonesia, Vietnam and Thailand. It may also expand its logistics assets. ARA shares are +0.6% at $1.815.