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Four Ways That ARA Asset Management Makes Money

ARA Asset Management’s (SGX: D1R) business interests lie in the real estate industry. It was listed on the Singapore Exchange in 2007. It has a current market capitalisation of S$1.4billion.

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Source : ARA second quarter earnings

Management fees are the biggest contributors to ARA’s revenue, making up 83% of revenue.

On this front, ARA is one of the biggest REITs managers with Asset under Management (AUM) of S$29.7 billion. It is notable that AUM has grown exponentially since listing in 2007 from S$9.7 billion.

ARA manages six listed REITs namely, Fortune REIT (SGX: F25U), Suntec REIT (SGX: T82U), Cache Logistics Trust (SGX: K2LU), Prosperity REIT, AmFIRST REIT and Hui Xian REIT. These make up roughly S$22 billion of the S$29.7 billion of its AUM.

Apart from listed REITs, ARA also manages unlisted REITs in which it has a financial interest. This accounts for roughly S$8 billion of assets that are contributed by private real estate funds that it manages.

Acquisitions, Divestment and Performance fees are the second way in which ARA generates revenue. This primarily consists of acquisition/divestment fees, project management and consultancy fees paid to ARA by its managed REITs.

This segment is more volatile than the management fee segment, as it depends on how many deals are made on behalf of its REITs.

Finance income is the third way ARA drives revenue. This segment comprises mainly of distribution income, interest income, net gain on fair valuation / disposal of financial assets and net foreign exchange gain.

ARA gets distributions as it holds equity interest in some of the REITs it manages. For example, it has approximately a 5% interest in Suntec REIT.

By looking at the different ways in which ARA generates its revenue, it can give us a better understanding of what makes it tick.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Esjay owns shares in Cache Logistics Trust.