Banyan Tree May Set Up More Development Funds

Source : The Business Times, April 17, 2008

MANAGER and developer of premium resorts and hotels Banyan Tree Holdings may set up more real estate development funds to support expansion in Japan and the Middle East.

'Our rapid expansion demands relatively large capital injections,' said vice-president of business development Paul Chong yesterday at the Cityscape Asia property conference.

Banyan Tree is creating closed-end funds to meet these needs and 'over the medium term, we hope to apply this strategy to our other growth regions around the world', he said.

Five growth regions were identified - the Americas, southern coastline of the Mediterranean, the Middle East, Indian Ocean and Asia-Pacific.

Details on the potential sizes or investors for the Japan and Middle East funds are not yet available.

Banyan Tree in January set up its first US$400 million Indochina hospitality fund to finance resort development in Hue, Vietnam.

The first closing took place in February and the second round of capital-seeking is now underway.

According to Mr Chong, group chairman Ho Kwon Ping is now in the Middle East for the Indochina fund roadshow, and the company hopes that final closing will take place by the end of the year.

The sub-prime crisis and the resulting credit squeeze do not appear to have dampened investors' interest in the Indochina fund. 'Although there is a global reduction in liquidity, there is still money out there to be invested,' said Mr Chong.

While the Indochina fund is only open to institutional investors, Mr Chong mentioned the possibility of listing it in about seven years' time.

The 280-hectare development in Vietnam will house seven resorts, two of which will be run by Banyan Tree. According to Mr Chong, the group has received '13 or 14 expressions of interest' from international hotel operators for the remaining resorts, and ground-breaking may occur in the middle of the year.

The project costs about US$850 million, and will be funded by both debt and equity.

Banyan Tree further plans to set up a China fund to raise US$500 million to US$700 million for its projects in China.

On prospects for Banyan Tree, Mr Chong said: 'When you find yourself in a global space with no single dominant global player, and you have a more than even chance to be a price maker and not price taker, you have no choice but to go for it. The window of opportunity, I think, will close in around five years or so.'

Banyan Tree's shares closed at $1.32 yesterday, up one cent.