Straits Trading : Unit Eyeing Property In Australia, Japan, S Korea, China Business Times

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The Business Times I Monday, March 14, 2016

TOP STORIES· 3

traits Trding unit eyeing property 1n Australia, Japan, S Korea, Chlna

CEO Desmond Tang wants to "move down slightly in the risk spectrum" and "maybe give more focus on current income"

By Lynette Khoo

lynkhoo@sph.com.sg

@LynetteKhooBT

Singapore

"SRE will progressively look to exit its mature investments and re-invest the returned capital into fresh opportuni­

.ties.''.

quisition, thanks to active asset man­ agement. SRE plans to spend A$l2 million to upgrade the building progressively in the hope of higher

40 per cent stake in Cordea Savills' Greater Tokyo Office Fund for 4.9 bil­ lion yen (5$59.1 million) last June, SRE is scouring for opportunities in Ja­

mitted US$80 million to ARA Summit Development Fund I to invest in deve­ lopment projects in Australia and South-east Asia. The fund has so far in­

STRAITS Real Estate (SRE), tfue invest­

ment unit of The Straits Trading Com­ pany, is looking to deploy the remain­ ing one-third ofits dry powder in mar­ kets such .as Australia, Japan, South Korea and China.

Showfog up on its radar are retail properties in China and a host of as­

Straits Trading owns 89.5 per cent of SRE, which was set up as a co-in­ vestment vehicle with the family of­ fice of ARA Asset Management CEO John Lim.

-Central to Straits Trading's rejuve­ nated business model to switch out of

' low-yielding assets into higher-yield­

rental income.

While China's economy is clearly under pressure, there are still oppor­ tunities in the tier-I and tier- LS cities to scoop up retail properties sold by developers caught in a credit crunch. "There are opportunities to buy some of them at attractive prices,"

pan through either direct acquisitions or investment with a fund manager.

Mr Tang revealed that the Greater Tokyo Office Fund, helmed by a team with a track record in buying dis­ tressed assets or those tied to under­ performing loans at a discount to fair market value, has already outper­

vested in two residential projects in Sydney and Melbourne.

Mr Tang, who joined SRE in Febru­ ary 2014, has over 23 years of experi­ ence in real estate investment and management, co-founded Growth­

Path Capital Private'Ltd, and was for­ merly cohead and managing dire,ctor

sets in Australia from traditional core

real estate such as offices to opera­ tional assets such as student housing, healthcare and elder care facilities. · "In a very volatile environment where there's a lot of fear, we want to

ing investments, SRE has emerged as a key earnings driver for the group. Straits Trading. chairman Chew Gek Khim told BT last year that the group plans to acquire more properties through SRE, and eventually mone­

Mr Tang added. "You also have in Chi­ na a lot of older malls in good loca­ tions. They no longer serve the young­ er people. We therefore see opportuni­ ty to buy them and undertake asset enhancements.''

formed target returns.

In Korea, SRE is open to logistics, offices and residentfal properties. Cognisant that sourcing for deals at the right price in this closed market re­ quires some local presence, Mr Tang

of Alpha Investment Partners.

On SRE's wholly owned subsidiary SRE Capital which was set up to invest in real estate and infrastnicture-relat­ ed securities in the Asia-Pacific, Mr Tang said that it has "met target"

'A key aspect of SRE's business model lies in its e1nphasis on cpital recycling. SRE will

move down slightly in the risk spec­

trum in ,terms of the kind of invest­

tise them through the Reit (real estate

investment trust) platform.

'SRE's maiden acquisition in China was an uncompleted retail mall in De­

said that SRE would probably tap the local presence of its strategic partner

for its first dividend paying fund SRE · progressivelylook

Asian Asset Income Fund (SAAJF). .

ments we look at and maybe give

more focus on current income," said SR£ chief executive Desmond Tang..

While shying away from revealing yield targets, Mr Tang pointed out that SRE was in no haste to fully uti­ lise the initial 5$950 million of capital commitment. "A key aspect of SRE's business model lies in its emphasis ori capital recycling," he explained.

Speaking to BT last week, Mr Tang cited SRE's acquisition of a Melbourne

, office building last July as a strtegy that mirrors what SRE is doing in vari­ ous markets. Such an asset offers good income with opportunities for value-adding, he noted.

The occupancy rate at 114 William Street has risen 7 per cent following the A$125 million (5$130 million) ac-

cember 2014 for 668.4 million yuan (5$141.3 million), for which it spent another 100 million yuan to fit out.

Located in Nan'an District of Chongqing, the mall is slated to open in the fourth quarter of this year "with high, if not full, occupancy", Mr Tang said.

Elsewhere, SRE is training.its eyes on Japan and Korea. After acquiring a

ARA Asset Management.

A flurry of tie-ups with ARA has ta­ ken place since SRE's inception - the latest was SRE's 5$72.8 million com­ mitment to ARA Harmony Fund III, which has acquired retail-focused commercial assets in Malaysia worth RMl.7 billion (5$573 million) from ARA Asia Dragon Fund I.

SRE had earlier in May 2014 com-

"In a difficult Reit market, he has ef­ fectively delivered on the fund objec­ tive at a lower volatility-," Mr Tang said of SRE Capital CEO Stephen Finch, who has over 30 years of experience in securities trading and fund man­ agement. SRE Capital is raising third-party capital for SAAIF now that its initial seed money of 5$130 mil­ lion is fully deployed.

to exit its mature

investments and

re-invest the returned capital into fresh opportunities." ·

Desmond Tang (above)