Goldman Sachs: Asian real estate giants pivot to asset-light model. Goldman Sachs says market is missing the upside
Major Asian real estate groups are moving away from traditional property ownership and development towards fee-based asset management, and investors are not fully appreciating the financial upside of this transition, investment banking company Goldman Sachs said in an equity research report.The Wall Street bank argued that while the market has broadly accepted the logic of these business transformations, with investor conversations shifting from “why they are transforming to how they will unlock the next phase of valuation re-rating,” the earnings benefits remain underpriced.“We believe investors underappreciate the magnitude of ROE uplift of 100-200bps over the next three years,” Goldman Sachs said, as reported by news agency ANI. Return on Equity (ROE) measures how efficiently a company generates profit from shareholders’ capital; a higher figure signals stronger profitability and capital efficiency.Under the fee-based model, companies earn recurring management fees by overseeing assets on behalf of institutional investors like pension funds, insurers and sovereign wealth funds, rather than depending on cyclical property development revenues or fluctuations in asset values.Goldman Sachs pointed to Brookfield, one of the world’s largest alternative asset managers, as a benchmark for what this transition can yield. The report noted that Brookfield’s fee-related earnings grew 26 times between 2011 and 2025, with fee-paying assets under management accounting for 70 per cent of that growth and fee rate and margin expansion making up the rest. A key lesson from Brookfield’s trajectory, the report said, is that as fee businesses scale up, valuations shift from being anchored to owned asset values towards being driven by earnings growth.Among Asian peers, CapitaLand Investment, Keppel and Hongkong Land are identified in the report as companies actively pivoting towards fee-based, asset-light fund management models, stepping back from capital-intensive balance sheet businesses.The report also flagged mergers and acquisitions as a potential accelerant for fund managers seeking to scale quickly, citing Brookfield’s acquisition-led expansion as a template.Goldman Sachs said the broader implication is that as recurring fee income grows as a share of profits, investors may increasingly evaluate these real estate groups on earnings growth rather than the book value of assets they own—a re-rating that the market has yet to fully price in.
