INVESTMENT
Jonathan Cheng of LC Capital explains his approach to driving value and returns
LC Capital represents a new approach to driving value and returns in an uncertain market. The company’s founder, JONATHAN CHENG, talks to PETER GUY
Now more than ever, alternative assets and private equity are under challenge to play an important role and deliver returns as global markets and economies struggle to recover after the pandemic. The firms that successfully emerge from the global wreckage will require uniquely focussed strategies and talented managers.
LC Capital (lccapital.co) was founded in 2015. Jonathan Cheng is its current Group CEO and Managing Director. LC Capital is a boutique, specialised investment operation favouring organic growth of assets under management and focusing on the Asia-Pacific region. It combines international management expertise of private equity with local knowledge and characteristics covering property development, and its associated business lines.
In property development it prefers to buy raw land and build new projects. Instead of refurbishing properties, LC Capital aims to add value to its investments besides just providing capital. Taking majority control over corporate governance allows LC Capital to strategically manoeuvre business direction of its
projects and investment vehicles. And majority control allows it to influence corporate governance and strategic business direction.
“We aim to be active not passive and seek to cultivate and drive holistic business cultures,” says Cheng. “We step into design and create synergistic business strategies to establish a vision, brand and ultimately an exit.”
Property is developed through its associated company Infinity Capital Group. Since 2015, LC Capital has completed and is currently developing $175 million in property in the Asia-Pacific region, including Singapore, Australia and Japan.
LC Capital positions and focusses itself as a disciplined private-equity manager – a smarter version of a typical property developer that seeks to create and sustain value in its investments. 1t combines food-and-beverage expertise, ownership and management in its property investments and developments. “Extracting a premium from the potential synergy between the collaboration between landlord and tenant represents a major opportunity and challenge if we assume both roles,” says Cheng. “For LC Capital, this relationship doesn’t necessarily have to be adversarial.”
“The traditional tenant-landlord relationship will always be contentious – there’s little sympathy on either side. Tenants rarely meet landlords and there’s no personal interaction as in the past, when the landlord would personally collect rent and visit the tenant. However, since LC Capital controls its properties and acts as the tenant, so the relationship is more collaborative with any partners we work with on the F&B concept.”
It began its property-development activities with luxury hotels and high-end residences in Niseko, Japan and Australia. LC Capital retains ownership and management in hotels and their food and beverage outlets. “Entering the food and beverage business was a natural extension of their ambition to create and sustain value in our properties,” Cheng explains.
The vision beyond property construction is to build a unified brand across properties. Each unit in Niseko features its own onsen and a commitment to creating a sense of quality of cosiness, warmth and belonging in each unit.
Cheng describes his hands-on style approach in making and managing investments and projects. He disavows management by spreadsheet, as he favours meeting employees and spends significant time on sites. “Understanding your businesses at the ground level is vital for success.”
Cheng assumes a cautious and nuanced view of how business and industry will emerge from the Covid-19 pandemic. “The post-pandemic environment will provoke a change in outlook, not necessarily a wholesale change in fundamental business and investment strategies.”
“Tourist numbers are presently at a standstill and revenues will be affected going forward. 1t will change the way our properties adapt to changing business conditions. The massive number of aircraft groundings are an indication of the severity of the situation. When the financial markets normalise, the economy and business will recalibrate.”
Cheng emphasises and leads an organisational learning process that enhances the brands of LC Capital, its businesses and the properties by creating a total, all-encompassing experience. For example, its TELLUS Lounge in Hong Kong is an expression of quality and sophistication. Cheng also explains his conservative rollout plans for TELLUS: “We were prepared to accept capital expenditures for the initial start-up period of 18 months in order to establish the business and brand.”
Cheng describes himself as an entrepreneur. And he defines that through the importance of getting out of one’s comfort zone and always sensing and feeling. “Business schools can teach a lot, but they only provide a framework for your experience. And with experience comes acumen. I
“An effective investor and operator understands a market, how a company’s operations succeed in that market, and develops a sense of what’s going on around them”
strive to achieve a natural balance between theory and practice.”
LC Capital’s seeks to grow its property development arm in Asia Pacific: it’s currently looking at acquiring land in Bali, among other opportunities overseas. Moving forward, there has to be scalability.
"An effective investor and operator understands a market, how a company’s operations succeed in that market, and develops a sense of what’s going on around them. Most of all, it’s all about the rhythm. If you make mistakes because of poor timing you can always get your rhythm back.”