The Ascott, QIA setting up serviced residence global fund

CapitaLand chief Lim Ming Yan said: “We are proactively working with strong capital partners to build up scale.”
CapitaLand chief Lim Ming Yan said: “We are proactively working with strong capital partners to build up scale.”

$811m tie-up with Qatar body is part of plan to launch six new funds by 2020: CapitaLand

CapitaLand's serviced residence arm ,The Ascott, has teamed up with the Qatar Investment Authority (QIA), the Gulf state's sovereign wealth fund, to set up a US$600 million (S$811 million) serviced residence fund.

The real estate group said the move was part of an ambitious plan to launch six new funds with up to $10 billion in total assets under management by 2020.

QIA and The Ascott will contribute equally to the joint venture, which is The Ascott's largest private equity fund to date, said CapitaLand in a statement yesterday. The Ascott will have the first right to manage the properties it acquires.

The tie-up with QIA comes as CapitaLand ramps up efforts to grow its fund management business.

"Real estate is a capital-intensive business and fund management is central to the active capital management strategy of CapitaLand as a dominant real estate player," said CapitaLand president and group chief executive Lim Ming Yan in the statement. "We are proactively working with strong capital partners to build up scale."

With the addition of The Ascott's new global serviced residence fund, CapitaLand now manages 17 real estate private equity funds and five real estate investment trusts (Reits) with more than $43 billion in assets under management.

It will also contribute towards reaching the group's 8 to 12 per cent target on annual equity returns, compared with the 7.1 per cent it achieved last year .

Mr Lim added at a briefing that the funds business will play an increasingly important role in CapitaLand's overall strategy as it builds up its portfolio, especially across "key gateway cities" in Asia.

Access to this financial backing will allow the group to spread its wings "without burdening our balance sheet", he said.

The new fund - to focus initially on the Asia-Pacific and Europe - will invest in serviced residences or rental housing for 10 years, with a three-year investment period, said Ascott chief investment officer Gerald Yong. It will eye mostly developments in business districts which can be taken to market quickly, such as those suitable for redevelopment or refurbishment.

Ascott chief executive Lee Chee Koon said the fund will accelerate its growth towards achieving its target of managing 80,000 apartment units globally by 2020. It will also allow the firm to raise its fee-based income. QIA, as "a strong long-term capital partner", will bring to the table its valuable network and related opportunities as well, he added.

Ascott manages a US$500 million Ascott China Fund focusing on serviced residences across China. It also manages a 12.6 billion yen (S$139 million) ARC CapitaLand Residences Japan Fund, which looks at rental housing properties in Japan.

CapitaLand manages private equity funds such as those invested in its Raffles City developments in China, as well as five listed Reits, including Ascott Residence Trust.

A Barclays Research report yesterday noted that CapitaLand's Raffles City China portfolio could also contribute towards its fund management platform after 2017.

It maintained a "neutral" call on the stock, which closed one cent higher at $3.37 yesterday.

A version of this article appeared in the print edition of The Straits Times on July 14, 2015, with the headline 'The Ascott, QIA setting up serviced residence global fund'. Print Edition | Subscribe