December 20, 2016 12:05 am JST
Collaboration leverages expertise in asset management and property development
CHING YEE CHOO, Nikkei staff writer
KUALA LUMPUR — Kenedix Asia, a unit of the largest independent Japanese real estate asset management firm, inked an agreement on Monday to spend about 91 million ringgit ($20.31 million) on Amanah Raya’s real estate investment trust units and stocks.
The first-ever investment by a Japanese firm in a Malaysian REIT sees Kenedix paying 85.98 million ringgit to acquire 15% of the units of AmanahRaya REIT. Kenedix said its decision to invest in the country was due to the long-term future prospects of the local real estate industry, which it found “very exciting.” It is especially upbeat about the growing demand for investment opportunities in Malaysian REITs from the expanding middle-income population.
Kenedix Asia also bought 49% of the shares of AmanahRaya-REIT Managers (ARRM), spending 5.15 million ringgit at 7 ringgit per share. Amanah Raya maintained a 51% controlling stake in ARRM, which manages the AmanahRaya REIT.
Both parties also signed a shareholders’ agreement as well as a memorandum of understanding to set up a bridge fund for the “purpose of acquiring and nurturing assets before injecting them into AmanahRaya REIT.”
“It opens opportunities in cross leveraging of knowledge and expertise in asset management initiatives, property development and asset management between the parties,” Amanah Raya Group Managing Director Adenan Md Yusof said at the signing ceremony. “The reason why we are selling to Kenedix is purely strategic. We are hoping we can grow our REITs in the next five years to double our fund size and acquire better assets.”
The spate of investments outside Japan is part of Kenedix’s medium-term management plan, between 2015-2017, to expand overseas. The Kenedix Group manages a number of diversified real estate funds in areas including residential property, retail facilities, health care and logistics.
“At this moment, we feel the price of AmanahRaya REIT is undervalued. If the market softens enough next year, it’s a good chance of acquiring property at a reasonable price. We think it’s a good time to invest in Malaysia,” said Kenedix Asia CEO and President Akihiro Nakao. When asked if he is worried about the weakness of the ringgit affecting Kenedix’s investments in Malaysia, Nakao said, “We are a long-term investor. We don’t care about short-term volatility.”
A wholly-owned subsidiary of Kenedix, KDA Capital Malaysia, will fund half the AmanahRaya REIT purchase through debt financing from a local financial institution to hedge foreign currency risk. The financing of the other half of the deal funds has not been disclosed.
The agreement is scheduled to complete by the end of January 2017.
AmanahRaya REIT had 14 properties and a total asset value of about 1 billion ringgit as of the end of September 2016 from a diversified real estate portfolio consisting of hospitality, retail, industrial, higher education and office buildings.
AmanahRaya REIT and ARRM are part of asset management company Amanah Raya, which is wholly-owned by the Malaysian government under the minister of finance.
The total market capitalization of Malaysian REITs is 41.07 billion ringgit ($10 billion) as of November 2016, according to an official from the ministry of finance who was also at the signing event.
Singapore-based Kenedix Asia is a unit of 21-year-old Japanese real estate asset management firm Kenedix. Since the establishment of the Singaporean subsidiary in May 2015, the unit acquired property in Vietnam in December 2015 and 20% of the shares in Thai-listed real estate developer AIRA Capital last October.
Kenedix manages real estate funds and private pension funds in Japan where it is a sponsor company for six public listed REITs and one private REIT.