Merrill to sell $2bn worth of realty portfolio in Asia

Merrill Lynch, one of the world's top financial management and advisory companies, is to sell the asset management of a real estate portfolio in Asia worth up to $2 billion (Dh7.34bn) alongside that of its $2.65bn Asian Real Estate Opportunity Fund.

As reported in May by Private Equity International magazine, the US firm is selling the management of the opportunity fund which launched at the end of 2006, closed to investors last September and is now fully invested.

However, the magazine said it has learnt that the bank is also offering buyers the management of all real estate investments made by Merrill Lynch's global real estate principal investments group that pre-date the opportunity fund and have remained on its balance sheet. The value of these assets combined with those in the fund is thought to be about $5bn.

One potential purchaser of the opportunity fund described the offer as being a "sweetener" because it provides fee income in addition to that from the opportunity fund. The active management of real estate for commercial banks is problematic, said insiders.

However, other sources suggest that problematic regulatory issues and the non-core nature of the business to Merrill's owner Bank of America are also reasons behind the decision to offload all of its Asia real estate investment management business. If sold, it would effectively spell an end to Merrill Lynch's real estate principal investment activities in Asia.

The group began investing in the region in the late 1990s, picking up assets in China, India and Korea as well as other parts of the region. Investments that are still owned by the banks are described as being a mixture of both equity and debt positions.

The asset management is currently carried out by a group of 60 real estate professionals based in major cities such as Tokyo, Hong Kong and Beijing.

According to insiders, US and European firms have approached Merrill Lynch to take on the management of the opportunity fund and all the other Asia assets. Those firms include New York-based Apollo Management, which is currently building a global opportunity real estate platform.

 

Keep up with the latest business news from the region with the daily Emirates Business 24|7 newsletter. To subscribe to the newsletter, please click here.