Japanese Megabank Sumitomo Mitsui Leads ARA’s $500M Pre-IPO Financing

ARA Asset Management has moved a step closer to a public listing, with the Singapore-based real estate fund manager announcing today that it is raising $500 million in a financing round led by Japan’s Sumitomo Mitsui Banking Corporation (SMBC) which is understood to be part of the run-up to an initial public offering on a public exchange.

The equity sale allies ARA with one of Japan’s largest financial conglomerates as the company plots a return to public stock markets less than five years after Warburg Pincus teamed up with chief executive John Lim to privatise Asia’s largest manager of real estate investment trusts.

“We warmly welcome SMBC Group as a new partner and investor to our thriving platform, and view the strategic investment in ARA by SMBC as a tremendous endorsement of our enduring business model and growth prospects,” said ARA chairman and CK Asset director Justin Chiu.

The investment by SMBC was disclosed less than a week after ARA announced the closing of a $1.3 billion joint buyout with the Japanese bank of Tokyo-based real estate investment manager Kenedix.

Prepping for a Fresh Listing

The investment by SMBC ramps up ARA’s profile in Asia’s second-largest economy, to complement operations it has established in Greater China and Europe as it has moved beyond its home base in Singapore.

In December, ARA moved a step closer to growing its Australian presence when Paul Weightman, CEO of Sydney-based Cromwell Property Group, retired from the firm in a move that could pave the way for the Singapore group to gain control of the Aussie fund manager after building a nearly 30 percent stake in the operation.

Helped along by this regional growth, a report by Bloomberg in February of this year indicated that ARA could raise as much as $1 billion in a dual-listing IPO as soon as this year, although that time frame could now be pushed into 2022.

Lim, Warburg Pincus and their associates valued ARA at $1.3 billion in the 2016 buyout, with the company’s assets under management having since tripled to S$116 billion ($86.8 billion) as of 31 December 2020. The Singapore firm has also expanded its range of investment vehicles by venturing into infrastructure funds, private debt and online investment startups.

ARA is understood to see opportunities to expand its REIT management business in Japan, which has some of Asia’s highest asset values, as well as one of the region’s most developed markets for real estate investment trusts.

In a statement, ARA said that with SMBC’s support the company hopes to further strengthen its core asset management business and bolster expansion plans in new-economy sectors such as logistics, data centres, infrastructure and private credit.

Expanding in Japan

SMBC’s equity stake in ARA is seen as separate from the $1.3 billion joint venture buyout of Kenedix first announced by the two partners last year.

An update announced last week revealed that ARA had increased its equity stake in Kenedix to 30 percent from 20.27 percent previously. ARA had earlier supported the privatisation and buyout of Kenedix by SMBC leasing arm SMFL, which maintains a 70 percent stake in the company.

With Japan serving as one of the region’s largest real estate markets and one of the top sources of cross-border investment, the deal could also enhance support for ARA’s regional array of investment vehicles.

“We look forward to working with the SMBC Group to extend our reach both in Japan and globally in terms of access to assets, capital and business opportunities more generally,” an ARA representative told Mingtiandi.

SMBC, the largest constituent of Japan’s giant Sumitomo Mitsui Financial Group, had $2.25 trillion in assets as of 31 December 2020 and a global presence in 40 countries. Under what it calls a “mutually beneficial and strategic partnership”, the megabank will support ARA’s asset-light business model and expansion plans, which align with SMBC’s own growth strategies in Asia.

ARA will draw on SMBC’s cash infusion to continue executing its “raise, invest, manage and build” strategy. Asia’s largest real assets manager has raised over $16 billion in equity capital since 2016, supporting a gross transaction volume of almost $20 billion during the same period.

Looking Outward

ARA’s pre-IPO financing comes as the company has been rapidly expanding its activities in the region.

In addition to its battle to complete the takeover of Cromwell Property Group, ARA last year acquired a majority stake in Australia-based developer and fund manager Logos Group for an undisclosed sum.

Last month, ARA agreed to acquire a 50 percent stake in Dasin Retail Trust’s trustee-manager and 5 percent of the trust’s units, in a deal that would extend the firm’s reach into China’s Greater Bay Area, The Asset reported.

Dasin, with assets under management of RMB 11.6 billion ($1.8 billion), has a portfolio of seven retail malls in high-population catchment areas with limited competition in Zhongshan, Zhuhai and Foshan.

ARA is also expanding in the digital realm. Last week, ARA-backed fintech firm Minterest Holdings announced that it had agreed to merge with blockchain platform Digiassets Exchange Singapore (SDAX) to build a global digital asset exchange ecosystem. ARA co-founder John Lim will be the chairman of the merged entity, SDAX Financial.