CapitaLand (CAPL) announced that it has established with Qatar Investment Authority (QIA) a 50-50 JV to set up a US$600m (S$809m) serviced residence fund with an initial focus on Asia Pacific and Europe. The JV term is 10 years with an investment period of three years, and the capital will be drawn down progressively from CAPL and QIA.

The fund will invest in development, redevelopment and turnkey opportunities, as well as acquire suitable projects for asset enhancement, repositioning or conversion into serviced residences and rental housing properties. This is Ascott’s largest private equity fund to date, and is part of CapitaLand’s efforts to further grow its fund management business with blue chip capital partners.

We understand that CAPL targets to launch six new funds with total AUM of up to S$10b by 2020. We are overall positive on this development, which will accelerate Ascott's portfolio growth and operational scale, increase the group's fee based income and enhance ROE. Maintain BUY with an unchanged fair value estimate of S$4.07.

Source: OCBC Research - 14 Jul 2015