Singapore: Bank of America’s Merrill Lynch is in talks with several firms including Blackstone and Apollo Investment Management to sell management rights of its $2.65 billion Asian Real Estate Opportunity Fund, a source with knowledge of the deal said.
The value of the deal would in the range of a few hundred million dollars as Merrill would try to command a multiple on the annual fee it earns from the fund, the source told the agency. The source declined to be identified because the deal was not public.
The potential sale comes as Bank of America, which took over Merrill Lynch earlier this year, is moving away from asset management. The bank is currently in talks to sell its Columbia asset management unit.
“The US banking model is very different from say the Singapore or Asian model of universal banking due to historical and regulatory reasons,” said David Lum, an analyst at Daiwa Institute of Research.
Merrill invested $700 million in the property fund that closed late last year and plans to stay invested, the source said, adding the talks may also involve other Asian real estate assets.
In October, Merrill said it had raised the fund to invest in Asian real estate, which it said then would invest mainly in Japan, China, India and South Korea..
“We are looking to transfer the GP function of this fund to an asset manager,” the source told the agency, adding the fund is fully invested.
Often, a GP (general partner) is active in the day-to-day operations of the partnership, which Merrill currently is for this fund and some other real estate assets.
BofA-Merrill Lynch declined to comment, and Blackstone and Apollo were not immediately available to comment.
A Reuters poll in June said demand for residential property is picking up in key Asian cities, but economic recession will continue to depress the region’s office markets, pushing Grade A rents in Singapore and Tokyo down nearly 40% in the next 18 months.