Transcription
Geopolitics has changed the game quite significantly. The world order has changed. Countries are recalculating. Companies are recalculating. So when we look at investments, we want to make sure that we have very strong convictions.
The world is moving faster than ever before. Entire industries are being reshaped overnight and leaders are having to make decisions in conditions no one would have ever predicted. So what this series does is it gives you an inside look into how these decisions are made or can be made. Real life stories and lessons from leaders who know how to navigate this volatility, who know how to build trust and who move forward when the future feels uncertain.
Hello, I'm delighted to be today in Capital's headquarters and with me I have the group CEO of Capital Investments, Mr. Lee Chikun. Welcome Chun to our podcast. Thank you for being with us.
Thank you. Thank you Shushan for inviting me. Maybe let's begin with talking about some history when you took over and some of the major changes that happened especially in 2021 when you had this massive transformation and then co hit.
Yes. Exciting start and then after that the world changed quite quickly right and how you've pivoted your strategy how you had to as a leader as a CEO in this time of great change make some big decisions what were the challenge challenges. So, let's start with that and then maybe let's then talk about your geographic footprint and let's talk about you know your leadership style.
Oh, thank you. That's a lot to unpack.
That's a lot to unpack.
Thank you. Just to put things in perspective, there's a lot of historical ties between Capital Land and DBS. In fact, this building that we are all in here was supposed to be the HQ of POSB building. A lot of people probably are not aware.
I didn't know that. What was it going to be called?
POS tower.
Right? It was like supposed to be the HQ building. I don't believe they had at that point in time decided what was going to be the name.
Oh, wow.
But it was during the Asian financial crisis. One thing led to the other and then the PDM CON took over.
And then subsequently obviously Capital was formed through the merger between DBS land.
Yes, of course. DBS Land and PDMCO.
So that's a lot of history.
That's a lot of joint history. Same pedigree.
Yes. So wouldn't have been here today without DBS.
So I want to at first uh thank DBS for years of partnership and help us to build us to where we are today. And the history of capital really started as a development company great leader at that point in time we have Mr. Lemanong who was the founding CEO and then after that Ming was the CEO. So we had strong development capabilities and of course um Singapore is a small market. We needed to go overseas.
Go overseas, right?
Yeah. No choice. The market is just too small. And what happened is at that point in time obviously I believe at that point in Singapore had a lot more experiences in terms of development projects. going overseas to places like China to Vietnam and even to India was possible because there was a gap in terms of development capabilities in these markets.
And we had an advantage.
We had an advantage that was one and the second thing was capital.
Capital.
Emerging markets there were issues around capital controls FX and the capital markets were just not developed.
Yeah. And we could bring capital, we could bring development capabilities and together with the willingness to send the best people to this market, we managed to build up um development platform beyond the shores of Singapore and of course and the balance sheet started to get a bit more constraint because you know development projects requires a lot of capital. We pioneered the REITs industry in Singapore.
Indeed, you had the first reach.
I worked very closely with uh with DBS in those days to launch the REITs. And when I took over at that point in time in 2018, we were very much a development company, a developer with a small asset management capability.
I see. So you were developer first, asset manager second.
That's right. So when I took over 2018 September uh we did a very deep review of our strategy with the board and the management.
The developers in all these emerging markets whether it is in China in Vietnam developers are no longer they are big. They have access to capital they could build they can have access to land they could build fast they could build cheaper they could sell not lower.
They could get bank loans right.
Yeah. So the competitive edge kind of disappeared.
Yeah.
So we have to ask ourself you know what do we need to do to change our business model so that we can be relevant and we can compete globally.
Yeah.
And we decided that the right thing to do is to really focus on building an asset management platform.
I see.
So that was the main reason. And why asset management? Asset management is really about building up teams in different markets capabilities across different asset classes. If you have good teams or people who can find good deals, deals that are below replacement cost, you can find people that can create value, then you will be able to raise capital.
And you can scale faster. Is that what it is?
Faster.
So chicken, I know you crossed is it 120 billion now in funds assets under management. Congrats.
That's quite quick I have to say. Remember you wanted to reach 100 and you got there. You know to your point you just said you moved from being a developer to more of an asset manager.
That's right.
What kind of changes in terms of team team composition, what kind of talent did you have to retrain people? Cuz you said you had a bunch of really good developers. I can imagine all willing to go everywhere. Great development skills. Development skills and asset management skills may not be the same. How did you move your entire organization to be more in line with your strategy?
In a strange way, co kind of helped in the merger exercise.
Oh, really? How?
It was one of the most challenging moment at least during my corporate career. We were concerned that the banks would loans for close and we spent so much time talking. And we drew down the bank loans. We drew down about $9 billion worth of loans just to make sure that.
Just to keep the lights on, right?
Yeah. Just to make sure that in the event that nobody comes back to the office we had two years.
Runway.
Runway things will be okay.
During co everybody had to work together because we had a common enemy. Which was co. And that really helped in the merger issues and really helped to galvanize the team and build a strong culture. Where we have a strategic clarity of what we want to be as an asset.
Manager.
Build a strong team culture where everybody was very focused and we built a financial discipline as well. And of course during co the major thing that we did was to do the restructuring exercise. Yeah. Where we managed to convince Tamasic which was our major shareholder to privatize the development business and keeping the asset management site listed.
Listed.
And that gives us a lot more flexibility. believe that by doing a restructuring and becoming an asset manager where the income stream is a lot more visible.
Yeah.
The share price will better reflect the earnings multiple. So, I must say that that's been a big change for us.
It's different skill when you have to raise funds for each fund.
Yes.
Oh, welcome to my world.
Yeah. Yeah. To be honest, it's life is a lot easier as a developer where we just decide on your own balance sheet to invest. Having to now, you have to please all your fund your LPS.
Yeah. All your investors.
Yeah. And we have a big listed REITs business and a growing private funds business. We have a listed CRI and we have eight listed REITs under.
CRI. Five in Singapore, one in Malaysia, one in Japan.
China now.
And one in China.
Yeah, congrats on that.
Quite lucky. The total market cap that we manage as a group externally managed manages about 60 billion. So it's not.
60 billion. It's not small. I mean all the different regimes, all the different regulators that we need to deal with, it's a lot of work.
It's challenging, right? Cuz you're in how many countries now?
We are in 40 over countries, but a lot of that is the escort business. The key investment markets, we are less than 10.
Okay.
Yeah. So that's really where we play the asset management business.
So, so let's change uh to the geographies because you're in let's say 40 over countries, but your key markets probably less than 10.
That's right. Where do you see the opportunities and why invest in a capital land fund?
I think for market opportunities in my view a large part of it will still be Asia pack based on.
Still Asia.
Asia pack.
I mean it's a place where we have strong advantage. We have strong boots on the ground.
So that's like us. I mean we've always said we stay focused on our backyard and our backyard is Asia and we're focused on Asia as well. And looks like you too, right?
Yeah. Yeah.
People know us. So that's Australia.
Australia. So we consider everything from China, India, Southeast Asia, Japan, Korea, Australia. These are our key core markets.
Your core markets where we have big strong teams on the ground, ability to find good deals. Banks know us.
We have done great deals and we are building very very strong teams. Yeah. And I must say that even though the fundraising environment for real estate has been challenging in the last few years because of elevated interest rates, I must say that uh we have done pretty well in terms of fundraising. I mean comparing with all the big guys that are playing in Asia.
And so what's your pitch? What do you tell potential investors? Why you why should they back you and your fund?
First we have boots on the ground, local knowledge. We co-invest. They want to see you have skin in the game.
Yeah. We promise high quality, consistent returns. That's our brand. So, if we say that we're going to deliver 10 12%, we want to make sure that we deliver 10 12%. If we're going to deliver 15%, we're going to make sure that we deliver 15%. Let's focus on making sure that we can deliver returns based on what we have articulated based on our boots on the ground. And I must say that uh so far based on the track record based on the team's ability to execute to find deals and to be able to return the capital we have been able to I would say make our investors quite.
Happy.
Yeah.
Great. So where are the opportunities? Is it in Australian office? Is it in Japanese multif family homes? Is it in India?
I know you're looking at Bangalore. And of course what about China? Because it's interesting. We've partnered with you for so many years and I still remember when you went to Australia for example, right? We had a deal and we came in quite quickly when you needed us and similarly when you had that restructuring in 2021.
I think was it during co or yeah you said it was during co.
I remember having to go to the board and have a quick turnar around. Within two weeks right? So you have to make these decisions sometimes quite quickly cuz market.
You need strong partners.
You need strong partners. So where do you see the opportunities so that as a strong partner I can follow you.
So I mean to be very honest the big backdrop. I mean, geopolitics um has changed the game quite significantly. The world order has changed. I think all of us are familiar. Countries are recalculating. Companies are recalculating. So, when we look at investments, we want to make sure that we have very strong convictions around themes.
Themes. Okay. Oh, wait. I heard about your 3Ds.
Yeah. Disruption, demographics.
Demographics.
And digital. Digital. So we just want to focus on this three areas and how we can find opportunities, how we can scale and we how we can confidently find exits for many of our LPs.
So we bought Windgate in Australia.
Mhm.
So it's not a big outfit but they have been around for a long time.
Y. Good track record.
And we believe that's an area that we can continue to grow. If you know that in Australia itself the banks are withdrawing from a lot of land financing, construction financing.
So it creates an opportunity for real estate asset managers like us. We have gone into private credit space but we're just going to focus on private credit relating to real estate. Not corporate credit. We understand real estate in the event there are any issues we can always take over the real estate. We can make things good and we can handle the exits for many of the players. So Australia, Korea, you will see hopefully us doing a lot more in India and opportunistically in Singapore as well in the private credit.
Interesting. But Singapore is not easy because it's overbank and there are many opportunities.
Sometimes there are opportunistic events that may appear that we can come in and play a role. So that's how we do.
So chicken, I was chuckling because you have your 3Ds, I have my four Ds and there's some overlap. My team knows that my first D is dependable. We have to be that dependable partner for our clients through thick and thin.
Good times and.
Good times and bad times especially in bad times you want to be there. The second D is like you digital.
The third D I have was disrupt and I wanted to ask you about the disrupt piece. But I told my team we have to learn to disrupt ourselves right because if we don't somebody else will. And the digital disruption the geni disruption the agentic AI disruption is all real and jobs are going to change the future of work's going to change and we're going to have to change with it. Agreed. And we have to learn, relearn, unlearn and try new things and keep experimenting. Asking you about sort of back to work. We kind of experienced COVID, no need to go to work and then now everyone's going back to work. How has the digital disruption or the digital transformation in companies affected how the world looks at real estate and how you look at real estate? And has it changed dramatically? Because I think people still want to go to work, right?
People still want to go to work and to be honest uh during co I thought that going back to work would change quite significantly but I'm at least temporarily relieved that it seems like big companies in the US in Europe and Asia work from home is not such a big thing at least but people are getting all the employees back but to be honest I think that there will be deeper changes in how work will be done how processes will be changed because of AI.
I don't think we have seen the full impact.
Oh, it's just starting. If you ask me how will that change the demand on office space that's still something that we need to watch quite carefully.
So that's why for us I believe office space will still be relevant you need to invest in office space in good locations amenities must be good it must be super environmentally friendly and cozy for people to why people need to go to work. And I don't believe that you can invest in office like in the past in the past office is a big asset class for many of the pension funds. Because you can lock in 15 years of.
Steady income stream right.
I don't believe that investment thesis is.
So that's no longer valid.
That's no longer valid.
Wow, that's a big change.
So you think shorter lease periods won't be 15 years like three five. But location, location, location is.
Location is important, right?
Yes.
So that's office. But pivoting to your other business which is hospitality. Surely that with everyone now focusing on experiences, staying longer, right? When they travel, they want to stay longer.
Yes. They want to have better cultural or local experiences, get immersed. That must be great for your hospitality business. Share some changes.
The hospitality business is really the Escuit's platform.
Yeah. Yeah, you used to be separately listed.
Well, you used to run it. You were CEO, right?
I was CEO, but that was after he has been privatized. Like Capital Land privatized in 2008. Or 2007 around then. And it was a business which typically focuses on trading assets and they only typically manage assets that we own. So it was after we had privatized it and we decided to really take a SLI approach towards growing the business. We injected the assets into the reads and the funds. And then grow a big platform. Today we are have about 170,000 keys globally. Of course the big players the big hospitality players are one over million in terms of keys but in terms of service apartment operator we are definitely the largest at least in I would say in our part of the world.
A lot of huge potential.
It has huge potential. I've stayed in your place in your asset in Tokyo that was.
Great so well managed so clean great location.
Frankly almost better than a hotel.
Yeah, yeah. I stay there a lot and it's a great business. Some people may not know for Every contracts that you sign typically last for 20 years. Some are getting 30 years and 40 years.
So the fee income.
It's very steady.
It's very.
Elongated. Yeah. And as you build this up, as the properties becomes operational.
The fee income will just continue to.
You just snowball it. So basically, you just keep getting more and more assets and it's long-term and it just keeps snowballing. Snowballing. Wow.
Yeah.
That's a great business. And it keeps renewing. Usually the owners are generally happy. Then what you need to do is to strengthen your.
Operation capability capabilities digital capabilities.
So you must have a great database of customers, right?
Yes. We started a loyalty uh program about I signed up.
Yeah. 7 million customers and and growing.
You got a lot of loyalty programs, Shikun. You've got your Ascot loyalty program. You've got your capital land all the malls, right? There must be a lot of interesting customer data there.
Yes. Yes. Yes. you know and things that we sell opportunities.
Yeah, we should work more closely with the robots, right?
Yeah. Our capstar program it's it's a lot of data.
It's really good. Yeah. So it's something that I mean we work quite closely together and we just use the blockchain now actually reward points are like another form of currency when you think about it right whether it's miles or points it's another form of currency just not cash and these currencies can be burnt in any of your shops or your hotels or anywhere for experiences or for credit. As a asset owner, what would you be thinking about using this customer data for? Enhancing the experience being more targeted in your nudging or cross-selling across platforms.
Mainly twofold. One is in the hospitality side.
Yeah. In terms of the booking journey where you decide how to invest the next dollar for hospitality assets locations.
And our confidence level in terms of being able to deliver the better returns that's extremely important for us for especially on the hospitality side. Shopping mall I must say that our data is strong in Singapore and in China. So having the tenants data having the shoppers burning of the points and where they shop what they buy that helped us to curate. And the negotiations and how to bring in different tenants to curate a better experience for the shopping mall.
Do you think shopping malls are a bit dated?
I mean if you look at Singapore, our malls are packed. One good thing about Singapore government is that there's a very strong urban planning. I mean they regulate the supply of shopping malls and with the increasing I would say whether it's visitors or even the population in Singapore even though slowly you see there's pretty strong healthy demand for shopping malls. But people still want to shop in the same old names or is it more experiential in China I heard now indoor skiing is like a big deal you know that's quite you know fresh Dubai has had it for a while.
China is really at.
So what are the like forefront stuff in.
In.
In Singapore?
Well in retail whether it's China or anywhere. The experience in retail in China they actually a lot more advanced really. Than Singapore quite innovative.
Innovative e-commerce e-commerce has disrupted a lot of high street fashion in China. So you need to constantly think of different experiences that you need to curate in the malls to make it relevant. Why are people coming to the malls? Yeah, for the regional malls that those that sit on top of train station, I think those are fine. Yeah. But for those that quite offc center in terms of location, if you do not have a good theme, the mall is just going to be empty. That's the level of competition that we see in China. In Singapore, it's a slightly different issue.
Singapore, first and foremost, is small. Secondly, it's hot.
Yeah. People go to the malls to cool down.
People go to the malls, right? They spend time there. And and to eat. So it solves a different problem. It solves a different problem because you can't be out there walking cuz you're persspiring. So you end up having your coffee, you do your work in the malls, you send your kids for tuition program in Singapore. Also in the mall in the mall. So it's a slightly different.
It's really part of daily life for for for us here.
That's right. In China, it's curated experiences.
That's right. Yeah. So interesting.
So interesting. Totally different. So talking about China, what's your view on China real estate?
The Chinese uh real estate industry has been quite challenged in the last few years.
Yeah. Do you think we've seen the end of it?
I can't quite tell whether we have reached the bottom. Anyone who has invested in the Chinese real estate market would have asset management issues to deal with. But if you ask me in terms of um China as a market if you look at all the different industries they are really at the forefront whether it's EV whether it's hospitality every industry they are so strong.
Yes.
Uh and I personally hope that you know we are seeing a gradual recovery in terms of the stock market.
Yeah. Consumer confidence.
Consumer confidence if that continues to sustain the growth continue to sustain. People start to feel comfortable to spend and then I would hope to see gradual improvement improvement in the real estate sector. But even though China has been definitely a more challenging market for us than most other markets that we operate in. I must say that we have done pretty interesting things. We have been able to recycle, we created a big master fund with a local insurance player, 5 billion reming to help to recycle assets and to look for opportunities. And let's do that first and do that well before we ask them for more capital. And I must say that uh just two months ago we managed to launch the first read in China. Took us a long time.
Congratulations.
We are the first foreign player that launched a retail focused read in China. Traded. Very well. I think given where it is trading at today, it will create another optionality for us to recycle more of our shopping mall assets into this vehicle and allowing us to grow our asset management capabilities.
And I remember you also did your first panda sustainability bond China together with us. Yeah, thank you for that.
So your last deal was demographics and you said China was at the forefront of being transformative. Do you see this trend of converting assets now into not yangla which is silver hair economy or aging but kangyang right which they say healthy living that's the word in Chinese but do you see that trend starting now where you can change some of your assets or build assets to help with an aging demographic that's still well that's mobile want to live well but may not want to have a traditional home and want to be in a societal living that is meaningful and not lonely.
So we see that already happening. We have about 250 service apartments in China operating and we used to only have I would say 70% foreign customers. Today it's about 80% domestic customers staying in our service apartments. M and even before this trend of a senior living type products, we actually have people who have sold or leased out their villas, their big apartments and they have chosen to stay with us in a service apartment. Right? Cuz they don't want to manage a big villa. They want to have services community and they feel comfortable. They're healthy enough to make sure that, you know, they can move around on their own. And they don't have to worry too much. But uh I I do see an big opportunity of that growing. The issue is how do you integrate the product together with insurance and to some degree some level of healthcare.
Yeah. Because you may be healthy, still active, going to a you know senior living type uh apartment. But as you continue to age you start to have issues.
Yeah. How do you make sure that you have sufficient medical?
Yeah, you want to be near a community hospital, some continuum of care. And if you can get that formula right, this is a sector that I believe will be very hot.
I think, you know, something we should explore between you, the insurance companies, healthcare providers, and banks, right? We should all work together.
We're all surrounded. We're all aging.
We all want to live well and and have a community when we age, right? And we're retired.
Yeah. So that's huge opportunity from a reverse mortgage perspective uh insurance perspective.
In fact, we started that too.
So I think that that to me it's it's it's big opportunity in in China. So there are different people trying out different models. The key is how do you build something that is scalable.
Scalable.
Yeah. And across.
And financially sustainable.
Yes. That's the key because for us to put our branding and our whether it's DBS branding or capital branding. We need to make sure that it's sustainable. So it's sustainable and it works.
Yeah. And customers are happy.
Yeah. So you think very long term. So do we. And I just want to thank you for the long-term partnership between DBS and Catalan that's really happened before you and I you know started. And hopefully we'll continue way well well after you know after we're no longer here.
Yes. I'm sure we'll do that.
We're two dependable partners. But you know we learned a lot. I've learned a lot from you on what's been happening in the world of real estate and all the transformation and we want to be to continue to be your partner as you evolve.
Thank you. Thank you. Thank you. Thank you.