ARA Aims To Double Asset Portfolio In Three Years

Source : The Business Times, February 21, 2008

It seeks to expand geographically, and into new asset sectors to cross $20b

SEEMINGLY undaunted by the global credit crunch, real estate fund and Reit manager ARA Asset Management is aiming to double its assets under management to more than $20 billion by 2011.

‘We have positioned ourselves to double what we have today in three years’ time,’ chief executive John Lim told BT in an interview.

ARA’s total assets under management stood at $10.4 billion at the end of last year - a jump from the $6.7 billion in assets the company was managing at the end of 2006.

ARA, which derives its income mainly from managing real estate investment trusts ( Reits ) and private real estate funds, is seeking to expand geographically and into new asset sectors to hit its target portfolio size.

Right now, the company is focused on office and retail properties in Singapore and Hong Kong.

But it plans to look at India, Japan, Australia and the Middle East for growth, Mr Lim said. He is also keen to branch out into the fast-growing hospitality and industrial sectors.

Related link: Click here for ARA Asset Management’s financial results

Mr Lim is undaunted by the global credit crunch. While he admits that fund-raising is getting more competitive, he said that there is still plenty of capital out there.

‘Banks might be more reluctant to lend, yes,’ Mr Lim said. ‘But when it comes to US pension funds or money from the Middle East, there is still plenty of money waiting to be invested.’

ARA divested a Syariah- compliant private real estate fund last October, recording an internal rate of return of 23.7 per cent. The fund was set up in August 2004 with $100 million in committed capital.

ARA now intends to establish a second Syariah- compliant fund this year, Mr Lim said.

ARA’s performance is also not likely to take a hit this year even in the face of the global market downturn, he said. The company has a good locked-in income stream in the form of base fees and performance fees for the Reits it manages, as well as portfolio management fees from its US$1.5 billion ARA Asia Dragon Fund, which closed last September.

ARA’s 2008 financial performance should outstrip last year’s, Mr Lim said. In particular, full-year contribution from ARA Asia Dragon fund is expected to provide a ’significant boost’ to revenue this year, he said.

ARA yesterday reported that its 2007 net profit rose 153 per cent to $34 million, up from 2006’s $13.5 million.

Revenue for the year ended Dec 31, 2007, rose 98 per cent to $62.1 million - from $31.3 million in 2006 - as the company brought in higher management, acquisition and performance fees.

Net margin rose from 43 per cent to 55 per cent. Earnings per share rose from 2.64 cents to 6.53 cents.

The company will pay out a final dividend of 3.8 cents a share, it said.

ARA, which is 16 per cent owned by Hong Kong’s Cheung Kong Holdings, was listed on the Singapore Exchange last November, with an initial offer price of $1.15 a share. The stock closed 0.5 cent down at 71.5 cents yesterday.