A clean exit: Cambodia's Trinity Structure and Finance

Trinity Structure and Finance: giving embattled businesses in the region a way out

July 25, 2012

Trinity Structure and Finance: giving embattled businesses in the region a way out
Every day in Phnom Penh, innumerable motorbikes and SUVs whizz along two of the city’s busiest boulevards past Gold Tower 42, a drab, unfinished monument to the excesses of real estate speculation in the Kingdom. From her office, Anne Cunningham cannot see the construction site where work has stalled since 2010, but her eyes remain fixed on the real estate in Cambodia and Southeast Asia.
Cunningham is COO of Trinity Structure & Finance, a company that specialises in buying other businesses looking to restructure, particularly in Vietnam, Cambodia and Thailand. After eliminating inefficiencies, Trinity then resells the most valuable parts of its fixed assets when the market is right. To finance the acquisitions, Trinity launched a $30m-fund called Trinity Investment Partners last year.
While Trinity’s focus does not lie solely on real estate, the current property market in the region is primed for take over. The burst of the 2008-09 bubble, when property values skyrocketed, left the region with many unused assets in need of acquisition. The opportunities are there but challenges remain because, despite a drop in the market, many sellers hope to secure the crazy prices of a few years ago. “Investment doesn’t work like that. We aren’t a collection house for distressed assets. We are buying carefully,” Cunningham says.
Trinity differs from other property investors because it buys 100% equity of a company, as well as its hard assets, allowing its shareholders to exit the business without having to liquidate or restructure the company themselves. According to Cunningham, this is a welcome option in Southeast Asia, where the tax and legal requirements of such exit operations can become a long process. “Our involvement makes the sellers happy by allowing them to make a quick deal,” she says.
Of course, such an arrangement comes with an element of risk, says Cunningham, meaning that every transaction is preceded by a thorough due diligence process, analysing every facet of the acquired company. “The job requires good knowledge of finance and of the regulatory environment,” she says, adding that the fund is regularly advised by the best international law firms and audit companies.
Charged with handling investments in different countries, Cunningham has needed to become familiar with the idiosyncrasies of each environment. Highly regulated Vietnam does not recognise printouts of electronic payments and requires papers signed and stamped by hand. Cambodia’s rules are more liberal, “but can also be difficult because of lack of guidance,” according to Cunningham, who adds that business is easier in Thailand, which she believes is adequately regulated.
Patience is also part of the job. “We take our time to get the investment that we want,” she says. “I guess we are fortunate in that we don’t have pressure from our investors to exit our positions within a fixed time frame, this allows us to take a long term view on some investments such as real estate. ” This is due to the fact that Trinity’s investors are mainly high net worth Asian individuals who know the fund’s managers well, allowing more breathing space than might be expected at a big investment house. “They trust us with the investment,” Cunningham says.
This trust is intensified, she believes, by the fact that Trinity has shown its own commitment to the fund it launched by holding a 20% equity stake within it. “An investor will often look for a fund where the general partner [the professional who looks after the fund on a daily basis] has some skin in the game, because they know it’s going to be well managed,” she explains.
Being small also allows the luxury of acting with discretion. The fund, which has an objective of three or four $5m to $15m deals in 2012, has only made two deals public so far, including last December’s acquisition of all subsidiaries of JSM Indochina, a property group whose assets included a $35.7m Cambodian portfolio.
Working carefully does not equate to a lack of reactivity, however. “If we can quickly flip an asset that we have acquired, we will,“ says Cunningham, who feels that maintaining a local presence is key to success in this market. A major part of her team’s mission is monitoring who is selling what and making sure any investment is relevant to the market’s moves. “We need to take advantage of an opportunity as soon as we can,” she says. “We’ve got to be flexible, agile, quick.”

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