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Nikkei Markets

CapitaLand expands into US housing, Indonesia hotels

Deals aimed at balancing emerging, developed market exposure, says new chief

CapitaLand currently owns or manages a global property portfolio worth over 93 billion Singapore dollars.    © Reuters

SINGAPORE (Nikkei Markets) -- In just two days as group chief executive officer of CapitaLand, Lee Chee Koon has steered the property giant into fresh territory outside its core markets of Singapore and China in search of growth.

On Tuesday, the company said it bought 16 freehold multi-family properties in the U.S. for $835 million, marking its foray into the country's rental housing market for individuals and families.

A day earlier, Ascott, its serviced residence arm, bought a controlling stake in Indonesian hotel operator Green Oak for $26 million, strengthening the Singapore company's still-small presence in the business hotels sector.

The two transactions would provide CapitaLand with new platforms to grow and diversify its business, Lee said at a briefing.

The company, Southeast Asia's largest developer, currently owns or manages a global property portfolio worth over 93 billion Singapore dollars ($68 billion). The assets include integrated developments, shopping malls, serviced residences, offices, homes, REITs and funds.

"For us to continue to build this fund management business, we need to go into new geographies and new asset classes," Lee said.

Lee, 43, was previously CapitaLand's group chief investment officer and has also served as CEO of Ascott. Before joining CapitaLand, he had stints in various Singapore government entities such as the Ministry of Trade and Industry, the Ministry of Finance, and the Monetary Authority of Singapore.

Lee's start contrasts with that of his predecessor Lim Ming Yan, who initially focused on streamlining the sprawling property company and exited Australia shortly after he took charge in 2013. Lim announced his retirement earlier this year.

Lee, however, said it was coincidence the deals were finalized just as he stepped into his new role. Negotiations to buy Green Oak, the holding company for TAUZIA Hotel Management, began two years ago, while discussions to buy the U.S. properties had been ongoing for several months.

He added that the new deals took place at a time when the company was accelerating efforts to divest stable, but lower-yielding, properties and invest the money in projects with higher potential returns.

"We will step up our pace of recycling," he said, adding that so far this year, the company has divested almost S$4 billion worth of assets. "It also helps that many of our projects under development, especially in China... have become operational and contributing in the last 12 to 18 months," he added.

Explaining the rationale for CapitaLand's diversification into the U.S. multi-family housing market, Lee said the investment would provide a better balance between developed and emerging market exposure as the Singapore company continued to scale up its presence in China and Vietnam.

Multi-family housing refers to separate housing units that are contained within a complex or compound with shared facilities. Such homes are typically rented out to individuals and families. CapitaLand already has a majority stake in U.S.-based Synergy Global Housing, which offers corporate leases.

The sector in the U.S. is worth over $3 trillion, providing CapitaLand with ample opportunities to grow the portfolio and inject the properties into one of its funds or real estate investment trusts later.

As for the Indonesian hotel business, CapitaLand said the acquisition of the 70% stake in Green Oak adds 122 hotels with close to 20,000 rooms to Ascott's portfolio, along with six popular hotel brands that Ascott can expand globally. Besides Indonesia, TAUZIA also manages hotels in Malaysia and Vietnam.

"On top of the units under TAUZIA, we see potential to add another 20,000 keys over the next five years across Southeast Asia," said Ascott CEO Kevin Goh.

Ascott manages over 90,000 units around the world, most of them serviced residences or apartments that are available for corporate leases.

--Kevin Lim

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