Morley aims for US$10b Asia-Pac property portfolio

Source : Business Times - 9 Jul 2008

MORE property deals in Singapore and the region could be in the making for Morley Fund Management, as it aims to build a US$10 billion real estate portfolio across the Asia-Pacific in the next four to five years.

The Aviva-owned asset manager now has about US$1.3 billion committed to real estate in the region. It made its debut in the Asia ex-Japan property market recently with the acquisition of Commerce Point from City Developments Ltd for about $180 million or $2,200 per square foot (psf) of net lettable area.

The deal, first reported by BT last month, was finalised last Thursday.

Morley has also set its sights on retail property in Asia-Pacific but ‘it is a tightly-held market, including in Singapore’, says Morley’s head of Asia real estate Nick Ridgewell.

Retail property as an investment class offers less cyclical and volatile returns than, say, office property, he reckons.

There is also a link between retail property returns and economic performance. And affluence in the Asia-Pacific region is rising, he says. Although the market for office properties in Singapore is tight, Mr Ridgewell still expects some rental growth up to 2009. Rents signed for recent deals in Commerce Point were $13 psf, he says.

New supply of office space may moderate rents subsequently but Mr Ridgewell reckons that ‘once we get through the pool of developments due to hit the market from 2010 to 2013, there may not be a lot coming after the next couple of years’.

In fact, Morley’s investment in Commerce Point is for the long term, he says. ‘We are a core investor. We are not expecting this to provide us with an opportunistic type of return. We are predominantly known to be looking for long-term solid returns, a lot of it through income and some capital growth.’

The asset manager plans to enhance Commerce Point’s net lettable area. The building’s vacancy rate is below 10 per cent, a level Morley is comfortable with. Morley will undergo a rebranding exercise in September and will be known as Aviva Investors. The asset manager has been expanding its Singapore office as business in the region grows.