Singapore's ARA and Straits Trading team up for acquisitions

ARA Asset Management, a manager of real estate investment trusts partly owned by Hong Kong billionaire Li Ka-shing, and Straits Trading have agreed to jointly invest in property funds.

Straits Trading will acquire a 20.1 per cent stake in ARA for S$294.4 million (HK$1.85 billion) from Li's Cheung Kong Investment 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 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, adding that assets under management in the new investment fund will climb to S$10 billion over time.

Lim will hold 19.25 per cent of ARA after the transaction, while Li's Cheung Kong will own 7.84 per cent, 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.

ARA's shares rose 0.3 per cent to S$1.75 in Singapore trading on October 25. The stock has gained 19 per cent this year, while the FTSE Strait Times Real Estate Investment, tracking the city's REITs, has declined 4.7 per cent.