ARA, John Lim's family office make foray into fintech with majority stake in Minterest

SINGAPORE (THE BUSINESS TIMES) - ARA Asset Management chief executive officer (CEO) John Lim's family office, JL Family Office, and the group's property management arm have jointly acquired a 52.08 per cent stake in crowdfunding platform Minterest for an undisclosed sum.

This is ARA's entry into the fintech sector and is part of the group's wider ambitions in the global real estate credit business.

Established in 2016, Minterest is a Singapore-based fintech company with licences to provide both corporate and personal loans. To date, it has originated loans of over $85 million in the Republic.

This move by ARA follows its recent acquisition of a majority stake in Venn Partners, a London-based specialist debt fund manager with £5 billion ($8.81 billion) in assets under management (AUM).

In a joint press statement on Tuesday (May 5), the group said that in the midst of the Covid-19 pandemic, the real estate credit market is a "positive space" to be in, given that the security and covenant protection relative to equity exposure is seen as more defensive.

ARA sees "immense potential" in the Minterest platform as a crowdfunding channel for real estate financing, complementing the group's real assets equity fund management business.

With growing investor interest in crowdfunding for real estate investments, these platforms - with data-driven models and lower operating costs - provide opportunities to directly access a pool of curated real estate investment opportunities.

Janice Koh, director of fintech at ARA's property management arm, said: "Traditionally, investors who want to own real estate would have to acquire the physical property or invest in Reits (real estate investment trusts)."

But with technology, things have changed, said Ms Koh, who also serves as chief commercial officer at Minterest.

"Crowdfunding is an increasingly popular way for developers to access the working capital required for development projects and for investors to achieve attractive risk-adjusted returns without the need to come up with a large amount of capital," she added.

This is expected to enhance investors' portfolio diversification across geographies and asset classes while delivering higher risk-adjusted returns, according to the group.

On May 15, Minterest - backed by ARA and Mr Lim - will launch its inaugural real estate secured mezzanine debt financing product, by way of co-investment with Straits Real Estate (SRE).

Retail investors will have the opportunity to participate in the secured mezzanine debt financing of a 64-level high-rise residential development project in Melbourne's central business district by "an established local residential developer", according to the joint statement.

The product will be professionally managed by SRE on investors' behalf.

SRE, which is co-owned by The Straits Trading Company and Mr Lim, invests in real estate related investment opportunities in the Asia-Pacific. It manages an investment portfolio across various asset classes spanning China, Malaysia, Singapore, South Korea, Japan and Australia, with $1.7 billion in AUM as at Dec 31, 2019.

Mr Lim said of the upcoming product launch: "The robust credit scoring process and system that Minterest has in place enables us to reach out to investors directly and efficiently, aided by technology. With the successful launch of the first real estate product on the Minterest platform, in partnership with SRE, ARA will leverage the platform to offer more real estate products in the near future."

Ms Charis Liau, group CEO of Minterest, said the investment from ARA and Mr Lim is a "great boost" to the fintech firm.

"With ARA's strong backing, we will be able to enlarge our user base, develop more products to provide alternative investment options to retail investors, especially at a time where interest rates are expected to stay lower-for-longer," she said.

This is not the first time Mr Lim and ARA are working with Minterest. In February, JL Family Office, ARA and The Straits Trading Company set up a $5 million fund to extend short-term loans to businesses in Singapore through Minterest.

An Ernst & Young report in March 2019 stated that global real estate crowdfunding is one of the fastest growing segments of crowdfunding, expected to grow at a compound annual growth rate of 18.5 per cent to a market size of US$9 billion (S$12.7 billion) by 2021.

ARA is an Asia-Pacific real assets fund manager with $88 billion in gross AUM as at Dec 31, 2019. It manages listed and unlisted Reits, private real estate funds and infrastructure funds in 28 countries. CK Asset Holdings, The Straits Trading Company, Warburg Pincus and AVIC Trust are some of its shareholders.