Management fees lift ARA's Q1 earnings

Reit management fees at ARA Asset Management was boosted by Cache Logistics Trust's acquisition of three Australian properties - including one in Kidman Park, South Australia (seen above) - in the fourth quarter of last year.
Reit management fees at ARA Asset Management was boosted by Cache Logistics Trust's acquisition of three Australian properties - including one in Kidman Park, South Australia (seen above) - in the fourth quarter of last year.PHOTO: ARA-CWT TRUST MANAGEMENT (CACHE) LIMITED

They account for lion's share of total turnover at $34.3m, a rise of 14% over previous year

Strong growth in fees from managing real-estate investment trusts (Reits) and investment portfolios has lifted ARA Asset Manage- ment's first-quarter results.

Net profit for the three months to March 31 rose 2 per cent to $19.4 million, while total revenue rose 10 per cent to $41.4 million, the firm said yesterday. Management fees accounted for the lion's share of the total turnover at $34.3million, a rise of 14 per cent over the previous year - underpinned by higher fees across all business segments. Reit management fees were up by 5 per cent to about $22 million, partly driven by fee contribution from Suntec Reit's acquisition of three floors of strata office space at Suntec Tower Two and Cache Logistics Trust's acquisition of three Australian properties in the last quarter of 2015.

The firm said portfolio management and service fees surged 48 per cent to $6.5 million, while real-estate management fees grew 19 per cent to $5.8 million.Total assets under management (AUM) as at March 31 stood at $28.9 billion, down from $29.1 billion at the end of last year. Reits accounted for 75 per cent of AUM at $21.7 billion.

The firm attributed the slight fall in AUM to the Singdollar growing stronger against foreign currencies, in particular the US dollar, and to divestments. ARA has a diversified portfolio, managing nine Reits and 10 private real-estate funds in Singapore, mainland China, Hong Kong, Malaysia, South Korea and Australia. In a statement yesterday, it said it is evaluating investment opportunities in Australia, South Korea and China for its various funds.

Net asset value per share as at March 31 was 54.42 cents, up from 52.17 cents as at Dec 31. Quarterly earnings per share came in at 1.94 cents, down from a restated 2.19 cents a year ago.

ARA group chief executive John Lim said in the statement: "Despite the ensuing volatile macroeconomic environment, our business model remains robust and scalable for us to pursue our growth strategies with prudence and discipline."

  • AT A GLANCE

  • NET PROFIT: $19.4 million (+2%)

    TOTAL REVENUE: $41.4 million (+10%)

    DIVIDEND: N/A

He said the performance of the office and retail portfolios under management is "expected to be stable for the year and our long-term growth initiatives will add value to stakeholders". When asked about the pressure on demand for space in the local office segment at an earnings briefing yesterday, he noted that demand is "cyclical and nothing to worry about" as long as the economy continues to grow.

"There will be an ample supply of office space in the next two years... By 2018..., I believe that there will be a shortage of supply, and the market will stabilise or even start to recover," he added.

As for the retail sector, he said malls will still evolve, focusing on lifestyle concepts which are not easily replaceable by e-commerce.

ARA units closed half a cent lower at $1.18 yesterday, before its earnings results were announced.

A version of this article appeared in the print edition of The Straits Times on May 04, 2016, with the headline 'Management fees lift ARA's Q1 earnings'. Print Edition | Subscribe