January 28, 2010
BoA decides not to sell Merrill funds
(HONG KONG) Bank of America plans to raise new money for Merrill Lynch's Asia property funds business instead of selling it due to a recovery in the real estate sector, sources said.
BoA was in talks with several private equity firms, including Blackstone Group and Apollo Investment Management, to sell management rights to its US$2.65 billion Asia Real Estate Opportunity Fund which the bank regarded as a non-core business, Reuters reported in July.
Despite negotiations lasting more than six months, no deal was reached because of disagreements over financial terms and the complicated structure of Merrill property funds, sources with direct knowledge of the matter told Reuters yesterday.
BoA has hired people in Beijing to raise money for a new Asia-focused property fund, the sources said, adding China remains a focus for the Merrill funds.
In China, Merrill invested a few years ago in the development of the Beijing Yintai Centre, a top-end complex where the luxury hotel Park Hyatt Beijing is located on the historic Chang An Avenue.
The sources, who were involved in the bidding process and have business ties with BoA, declined to be identified as they were not authorised to speak to the media.
'Basically there was a lack of interest from Merrill Lynch's part to go forward with the process,' said a prospective bidder, who asked not to be identified.
A BoA spokesman in Hong Kong declined to comment.
Bank of America took over Merrill at the end of 2008 during the financial crisis.
In October 2008, just two months before the deal went through, Merrill closed and launched the Asia property fund with focus on Japan, China, India and South Korea.
Investors, also known as limited partners, in the Merrill property fund include many rich families and some sovereign funds in the region, said one of the sources.
Property market transactions in Asia have risen in recent months as investor confidence improves and banks start lending.
A research report released last week by property consultancy firm DTZ, for instance, showed the value of property transactions in South-east Asia rose 25 per cent in the last three months of 2009 from the preceding quarter.
Despite a clear recovery in the sector, some analysts and government officials are worried that asset bubbles were forming due to the sharp rises in property prices.
Merrill is not alone making property investments in Asia.
Rivals, including Goldman Sachs and Morgan Stanley, are long-time players in some key Asian markets like China.
In March, Morgan Stanley raised US$6 billion for a new global property fund, including money from China Investment Corp, the sovereign wealth fund.
Martin Koh/ Sherry Tang