ARA Founder’s Family Office Teams With Straits, Savills IM for $500M UK Retail Fund

Savills Investment Management has secured backing from the family office of John Lim, the co-founder of Singapore-based ARA Asset Management, for a “contrarian” UK retail park fund that aims to raise £360 million ($500 million).

The cornerstone investors of Savills IM’s latest fund are The Land Managers, which serves as the real estate investment division of the JL Family Office, and Straits Real Estate, the real estate investment subsidiary of The Straits Trading Company conglomerate.

The new vehicle seeks to exploit the mismatch between the strong operating performance of UK retail parks and their relatively low property prices and high yields compared with other sectors, Savills IM said Tuesday in a release. The fund will be managed by Harry de Ferry Foster, Savills IM’s head of UK.

“The UK retail sector has had a torrid time over the last five years, particularly the high street and shopping centre sub-sectors,” de Ferry Foster said. “This new fund is targeting assets in a sub-sector which has been overlooked and oversold, but has proven its resilience to the headwinds facing the sector. This is a good opportunity to secure assets with a high and secure income yield and we believe it will be very attractive to investors.”

Reaping Pent-Up Demand

With much attention focused on e-commerce and home delivery, the new fund is a contrarian play which seeks to acquire retail park assets with relatively low rents, typically complexes anchored by food providers and discount retailer tenants like B&M and Home Bargains Food Warehouse.

“This sub-sector has demonstrated resilience to the trend of online shopping, as sales largely consist of daily necessity and value-oriented items,” Savills IM said. “This part of the market has proven to be appealing to in-store shopping, with the high take-up of click and collect and low unit prices of goods making online and home delivery less viable.”

The fund will draw on the research and brokering capabilities of the retail park team at Savills IM’s London-listed parent company, Savills Plc, and will search for properties with net operating income yields of 7 to 9 percent or more.

The Land Managers, led by ARA co-founder John Lim’s son Andy Lim, is a boutique real estate investment firm under the JL Family Office, which manages the private investments of the elder Lim. The family office used to hold a 10 percent stake in its partner in the fund, Straits Real Estate, but it announced in April that it would sell its interest for S$105 million ($78.3 million) in cash to a subsidiary of The Straits Trading Company.

“We are pleased to work with Savills IM in our first investment into the UK,” Andy Lim said. “The country is experiencing a rapid recovery and its growth is set to be the fastest in Europe. By investing in a defensive retail asset class, we hope to capitalise on the pent-up demand from the COVID-19 restrictions over the last couple of years.”

Buoyant Britain

Despite disruptions caused by the pandemic and Brexit, the UK continues to attract capital from deep-pocketed investors in Singapore and elsewhere in Asia.

Last week brought word that GIC, Singapore’s sovereign wealth fund, had acquired a 40 percent stake in a life sciences park near the University of Oxford as part of a newly announced strategic partnership between the $744 billion fund and the university’s Magdalen College. The Financial Times reported that GIC paid £160 million for its stake, with Magdalen College retaining its majority interest.

In September, reports surfaced that the Kuok family behind Hong Kong developer Kerry Properties had purchased an eight-storey office building, Cassini House, in the swanky St James’s district of London’s West End for £145.5 million ($198.8 million), becoming the latest members of Asia’s elite to pick up property in the playground of England’s aristocrats.

In late August, Singapore’s Mapletree Investments announced its acquisition of four purpose-built student housing assets in England from UK developer Vita Group for a total consideration exceeding £165 million ($227 million), including properties in Nottingham, Leeds, Exeter and Bristol.