ARA Asset Mgt surges more than 8% on Shanghai property investment

Singapore

SHARES of ARA Asset Management surged more than 8 per cent on Thursday, a day after it said it would be setting up a fund, ARA Harmony VI, to invest in a S$4.1 billion China commercial property.

ARA Asset Management hit S$1.410 apiece earlier, before hovering around S$1.405 each, up 5.5 Singapore cents, or 4.07 per cent, at 4.30pm. It eventually closed up 8.1 per cent, or 11 Singapore cents, at S$1.46.

ARA Harmony VI fund will be managed by ARA and boasts of China Life as its core investor. The other fund participating in the deal is Peninsular Investment Partners, which manages the assets of South Korean sovereign wealth funds.

Investment in the property, known as Century Link, would be the biggest single-asset property transaction in the Asia-Pacific this year, ARA had said.

Century Link is a premium-grade integrated commercial property in Pudong, Shanghai, with a gross floor area of 360,000 square metres. It sits on top of Shanghai's four-subway line interchange hub.

"The partnership with China Life is seen to be a coup as we see this as ARA's ability to get access to deals of significant size plus establish strong relationship with capital partners to co-invest together," DBS said in a note.

The research house added that "the potential from this relationship could be immense especially if China Life may have other properties that they could package in a fund to be managed professionally".

China Life was recently involved in a US$1.4 billion acquisition of a portfolio of six China malls in partnership with Singapore's GIC. They reportedly bought the malls from a Chinese developer known as Joy City.

DBS said that the inclusion of ARA Harmony VI only means "further upside accretion to its current 4 per cent distribution per unit yield. The house has a "buy" on the units, with a target price of S$1.76 each.