CapitaLand Investment Acquiring Singapore’s SC Capital to Boost Fund Management

CapitaLand Investment Ltd has struck a deal to expand its fund management business with the proposed acquisition of Singapore-based real estate investment manager SC Capital Partners, tripling its funds under management in Japan while growing its business across Asia Pacific.

Under the terms of an agreement announced Wednesday, the Temasek Holdings-backed goliath will acquire an initial 40 percent stake in the firm led by Thai financier Suchad Chiaranussati for S$280 million ($214 million) in cash, with options to acquire two additional 30 percent stakes on the third and fifth anniversary of the transaction closing date, subject to the fulfillment of conditions. The two firms expect the initial investment to close in the first quarter of 2025, subject to regulatory approvals, with CapitaLand Investment attaining full ownership by 2030.

Chiaranussati, who will retain full autonomy over the business until CapitaLand Investment completes its acquisition of the remaining 60 percent stake in the fund manager, pointed to the partnership as enabling the firms to capitalise on growth opportunities and dislocations in Asia Pacific’s property markets.

“We are excited to be joining forces with CLI to capitalise on the growth opportunities and dislocation we see in the real estate investment management markets in Asia Pacific,” Chiaranussati said in a release. “Our strategic partnership with CLI will enable SC Capital Partners to gain access to additional resources, enabling us to accelerate capital deployment and achieve scale, which is becoming increasingly important. Together with CLI, we look forward to driving continued strong performance and are committed to creating value for our investors.”

Complementary Platforms

As part of the partnership, CapitaLand Investment will also invest a minimum of S$524 million ($400 million) in SC Capital’s fund strategies to support the growth of the platform and strengthen investor alignment. SC Capital will continue to operate independently until the full sales of the business is completed and CapitaLand Investment will participate at the board level in investment strategies that require the use of strategic capital.

Acquiring the initial 40 percent stake in SC Capital will increase CapitaLand Investment’s FUM by S$11 billion to S$113 billion, with group CEO Lee Chee Koon hailing the complementary nature of the partners’ portfolios in terms of geographies and sectors.

“This acquisition is one of the strategic thrusts to scale up our capabilities and build bench strength across our focus markets, accelerating CLI’s growth as a global real asset manager to create greater value for our stakeholders,” said Lee. “CLI and SCCP have complementary portfolios and geographic presence across the Asia Pacific region. The addition of SCCP’s capabilities will further solidify CLI’s foothold in the region.”

SC Capital’s S$11 billion of FUM includes its sponsorship of Japan Hotel REIT, a JPY672 billion TSE-listed hospitality trust, with the remaining S$4.9 billion deployed across private funds.

Japan accounts for 76 percent of SC Capital’s portfolio by geography, while lodging represents 76 percent of the fund manager’s FUM by sector. SC Capital’s other markets include Australia and New Zealand, Southeast Asia, Greater China, Korea and the Maldives, with non-hospitality investments spanning office, retail, new economy, residential, and other sectors.

Bigger in Japan

Describing Japan as a “focus” market, CLI will gain immediate scale in the country following the initial acquisition, with FUM set to grow from S$2.9 billion as of 30 June to approximately S$11 billion, while Japan’s share of CapitaLand Investment’s portfolio will increase from 3 percent of its current FUM to 10 percent of the combined S$113 billion FUM.

The deal provides CapitaLand Investment with its first toehold in Japan’s listed property trust market, with Japan Hotel REIT’s JPY345 billion market capitalisation ranking it as the country’s second largest hospitality trust and 13th biggest REIT.

The CapitaLand deal comes less than a month after SC Capital hired former KKR and PAG executive Daisuke Hiramoto as head of Japan to oversee its investment activities in the country, after a flurry of Japanese deals by the fund manager in the past two years.

SC Capital made a splash in July 2023 when it teamed up with Goldman Sachs Asset Management and the Abu Dhabi Investment Authority (ADIA) to acquire a portfolio of 27 Japanese resort hotels totaling 7,124 rooms from Daiwa House Industry for $900 million.

Since then, the fund manager has acquired two Okinawa hotels and two budget hostelries in Tokyo and the Hotel JAL City Kannai Yokohama. Industry insiders predict that SC Capital will soon acquire the Hilton Fukuoka Sea Hawk Hotel from Mizuho Leasing after Singapore sovereign giant GIC sold the 1,053-key property to the leasing firm in July.

Through Japan Hotel REIT and other private funds, SC Capital owned 89 lodging assets totaling around 22,000 rooms in Japan as of 31 July.

Private Funds Boost

CapitaLand Investment also pointed to the deal as enhancing its suite of private fund products, with the property giant describing SC Capital’s opportunistic private funds series as complementary to its growth strategy. SC Capital currently manages eight private funds, including four opportunistic vehicles, three specialised strategies funds, and a core plus fund.

The acquisition comes after Simon Treacy stepped down last month as CEO of CapitaLand Investment’s private equity real estate business after three years, as the Singapore government-backed company combined its existing real estate and alternative assets units into a unified division dubbed Private Equity Real Assets, with Lee heading the merged unit alongside his group leadership role. Treacy’s departure came nearly a year after Patrick Boocock, the company’s then-CEO for private equity alternative investments, left after two years with the firm.

CLI also pointed to the partnership as providing access to SC Capital’s pool of over 60 investors, most of which are new to CapitaLand Investment, with the combined investor base totaling around 120 global institutional investors.

“Together, our collective deal sourcing, investment and asset management network and capabilities across various thematic strategies will provide investors with wider access, and more differentiated and proprietary deal origination,” Lee added. “There will be abundant opportunities to cross pollinate talents, as well as broaden and diversify our fund products. With our shared entrepreneurial and winning mindset, and our respective competitive strengths, we are confident that our strategic partnership will bring further value to our stakeholders.”