ARA Asset Management

[getrich]

The seed capital financing tap from SRE, margin financing of listed equity stakes, $90 million cash raised from the rights issue and recycling of the potential performance fees from ADF1 does suggest a promising pipeline of seed capital for a number of private funds over the next few years IMO. The Management would have taken care of the financing issues for the next few billion dollars worth of AUM. The networking to find/convince investors for its new funds is another leg of the stool. The final leg (the hardest) would be finding assets worth acquiring. Only when all 3 legs are ready, can a fund management company truly rest on this stool and taste the fruits of its labour.

(Not Vested)

Given 2 companies with the same growth rate and ceteris paribus, the asset-heavy company would always trade at a lower PE and P/B multiple than the asset-light company.

So color me unimpressed with ARA's latest pivot.

[Bytesizedinvestments]

It is well-known that ARA is aggressively increasing its stake in Suntec, a move that many sees ARA steering away from its asset-light, which is a valid point.

However there are other factors too, of which, Boon has listed out. REIT managers are appointed by shareholders directly or indirectly. ARA realized that they must have strategic stakes in the listed companies that they managed, otherwise their position as the REIT manager would be threatened, should those REITs be majority owned by a single shareholder who has a different alignment as ARA. Hence ARA have to guard their interests by increasing their strategic stakes. 

EnSabahNur and Nick also pointed out that need for seed capital doesn't not necessarily equates poor management or business fundamental. It just means a difference in business model or principles. As such, I view that the need for seed capital is indeed the need for alignment of interest for shareholders. I would be more convinced if the fund managers put their money where their mouth is.

Did a short write up on ARA Rights Issuance a couple of days back - http://www.bytesizedinvestments.com/what...ns-to-you/ 
____


Financial Freedom can be achieved through prudence and patience capital.

http://www.bytesizedinvestments.com/

Welcome to our VB.

Regards
Moderator/CF

Dear CityFarmer,

Thank you. Have been following the forums for a couple of years. Hope to value-add and learn from the gurus here!

Cheers!
BSI
____


Financial Freedom can be achieved through prudence and patience capital.

http://www.bytesizedinvestments.com/

[CityFarmer]

Dear CityFarmer,

Thank you. Have been following the forums for a couple of years. Hope to value-add and learn from the gurus here!

Cheers!
BSI
____


Financial Freedom can be achieved through prudence and patience capital.

http://www.bytesizedinvestments.com/

VB allows viewing by guest. Many of them are actively viewing for years, which is good to promote financial literacy  

Looking forward for more participation from you.

Thank you

Regards
Moderator

[Nick]

Recently, CIMB initiated coverage on a REIT & property fund manager listed in ASX - 360 Capital Group.

https://brokingrfs.cimb.com/7ixvmHnZRLSi...zB8pw2.pdf

Granted, its AUM is substantially smaller than ARA's but it could be a useful comparable for analysis by investors.

(Not Vested in Either)

[Boon]

It is well-known that ARA is aggressively increasing its stake in Suntec, a move that many sees ARA steering away from its asset-light, which is a valid point.

However there are other factors too, of which, Boon has listed out. REIT managers are appointed by shareholders directly or indirectly. ARA realized that they must have strategic stakes in the listed companies that they managed, otherwise their position as the REIT manager would be threatened, should those REITs be majority owned by a single shareholder who has a different alignment as ARA. Hence ARA have to guard their interests by increasing their strategic stakes. 

EnSabahNur and Nick also pointed out that need for seed capital doesn't not necessarily equates poor management or business fundamental. It just means a difference in business model or principles. As such, I view that the need for seed capital is indeed the need for alignment of interest for shareholders. I would be more convinced if the fund managers put their money where their mouth is.

Did a short write up on ARA Rights Issuance a couple of days back - http://www.bytesizedinvestments.com/what...ns-to-you/ 
____


Financial Freedom can be achieved through prudence and patience capital.

http://www.bytesizedinvestments.com/

Being a GP of a Private Fund, ARA has to inject 10% seed capital into the fund to show alignment of interests with investors (or LPs). As most Private Funds are highly leveraged with assets at fund level being pledged as collateral, relatively speaking, I would still consider Private Fund to be an asset-light business.
 
If 10% is the market norm, then it is easy to work out the amount of seed capital required for ARA to grow its Private Fund business on an unlevered basis.
 
But for listed Reits, it is of different nature.
 
S-Reit Manager may be removed by way of a resolution passed by a simple majority of unit-holders present and voting at a general meeting. A meeting of unit-holders may be convened by the requisition of not less than 50 participants representing not less than 10% of the issued units of the property fund.
 
To guard against any takeover or being removed as a Reit-Manager of Suntec Reit, strictly speaking, ARA together with its strategic partners/alliances, must own at least 50.1% of the Suntec Reit, to be 100% safe. 
 
With more than 80% of Suntec REIT shares being held in the hands of the public, IMO, an increase in stake of Suntec Reit to 4% by ARA would still be considered as inadequate and insignificant in guarding against any possible takeover or being removed as the Reit-Manager.
 
I could be wrong on this but it appears to me that the purpose of the 4% strategic stake serves to align interest with unit-holders more than to fend off takeover or being removed as the RM.     
 
But, is 4% sufficient to show alignment of interests with unit-holders of Suntec Reit?
 
Of course, 4% is better than 1%, but why not 10% as in Private Funds?
 
If 10% were the expectation for listed Reits as well as in the Private Funds, then ARA would be severely under-capitalized – Ha-ha !
______________________________________________________________________________________________________________________________________

[Nick]

STC has 6% stake in Suntec so their combined stake is around 10%.

[Boon]

STC has 6% stake in Suntec so their combined stake is around 10%.

There is no single party owning more than 10% in Suntec Reit.
 
I think STC (& companies) owns around 8%, which means the combined stake of ARA/STC alliance is around 12%.
 – probably enough to show alignment of interests with the remaining 88% of unit-holders of which no single party owns more than 10% - but still not enough to guard against any takeover/ or requisition for removal of Reit-Manager.
 
Interestingly, BlackRock, another “Fun” Manager “owns” 6% in Suntec – ha-ha!
___________________________________________________________________________________________________________

[Bytesizedinvestments]

STC has 6% stake in Suntec so their combined stake is around 10%.

There is no single party owning more than 10% in Suntec Reit.
 
I think STC (& companies) owns around 8%, which means the combined stake of ARA/STC alliance is around 12%.
 – probably enough to show alignment of interests with the remaining 88% of unit-holders of which no single party owns more than 10% - but still not enough to guard against any takeover/ or requisition for removal of Reit-Manager.
 
Interestingly, BlackRock, another “Fun” Manager “owns” 6% in Suntec – ha-ha!
___________________________________________________________________________________________________________

Boon,

Btw, not sure whether your post was trying to allude to the potential relationship between Blackrock, ARA and Suntec?

But it reminded me of a news that relates BlackRock with ARA.

http://www.businesstimes.com.sg/real-est...al-for-now

No comments had been made by ARA yet. Even so, we still have to observe to see whether if the deal would be yield accretive (for the Private Funds) with the upcoming office glut in the CBD.

[Boon]

STC has 6% stake in Suntec so their combined stake is around 10%.

There is no single party owning more than 10% in Suntec Reit.
 
I think STC (& companies) owns around 8%, which means the combined stake of ARA/STC alliance is around 12%.
 – probably enough to show alignment of interests with the remaining 88% of unit-holders of which no single party owns more than 10% - but still not enough to guard against any takeover/ or requisition for removal of Reit-Manager.
 
Interestingly, BlackRock, another “Fun” Manager “owns” 6% in Suntec – ha-ha!
___________________________________________________________________________________________________________

Boon,

Btw, not sure whether your post was trying to allude to the potential relationship between Blackrock, ARA and Suntec?

But it reminded me of a news that relates BlackRock with ARA.

http://www.businesstimes.com.sg/real-est...al-for-now

No comments had been made by ARA yet. Even so, we still have to observe to see whether if the deal would be yield accretive (for the Private Funds) with the upcoming office glut in the CBD.

 
ARA has been the Reit-Manager for Suntec since its listing on SGX back in 2004 without having to take up a “strategic stake” in it until May 2015 – roughly 6 months after BlackRock emerged as a SSH of Suntec in Nov 2014.

I could be completely off the track but I am more inclined to think along the line of BlackRock being a threat to ARA’s Reit-Manager role in Suntec.
________________________________________________________________________________________________________

[Bytesizedinvestments]

STC has 6% stake in Suntec so their combined stake is around 10%.

There is no single party owning more than 10% in Suntec Reit.
 
I think STC (& companies) owns around 8%, which means the combined stake of ARA/STC alliance is around 12%.
 – probably enough to show alignment of interests with the remaining 88% of unit-holders of which no single party owns more than 10% - but still not enough to guard against any takeover/ or requisition for removal of Reit-Manager.
 
Interestingly, BlackRock, another “Fun” Manager “owns” 6% in Suntec – ha-ha!
___________________________________________________________________________________________________________

Boon,

Btw, not sure whether your post was trying to allude to the potential relationship between Blackrock, ARA and Suntec?

But it reminded me of a news that relates BlackRock with ARA.

http://www.businesstimes.com.sg/real-est...al-for-now

No comments had been made by ARA yet. Even so, we still have to observe to see whether if the deal would be yield accretive (for the Private Funds) with the upcoming office glut in the CBD.

 
ARA has been the Reit-Manager for Suntec since its listing on SGX back in 2004 without having to take up a “strategic stake” in it until May 2015 – roughly 6 months after BlackRock emerged as a SSH of Suntec in Nov 2014.

I could be completely off the track but I am more inclined to think along the line of BlackRock being a threat to ARA’s Reit-Manager role in Suntec.
________________________________________________________________________________________________________

Dear Boon, 

I am none the wiser. But my guess is the same as yours. I believe you had hit the raw nerve and that could be one of the reasons for the Rights Issuance in the first place.

ARA realized that their position as REIT Manager could be threatened and replaced, hence they are loading up on their stakes in Suntec. 

Let's watch how the management unfolds the events.

Cheers
Byte Sized Investments
____


Financial Freedom can be achieved through prudence and patience capital.

http://www.bytesizedinvestments.com/