ARA Asset Management is poised to set up an infrastructure funds management business within the next few months, becoming one of the first few pure play real estate-focused Asian investment managers to venture into the infrastructure sector to take advantage of the growing institutional demand for the asset class.
According to sources familiar with the matter, ARA is currently in the process of hiring a team of investment professionals to run the infrastructure business based out of Singapore. While the core infrastructure team will initially consist of a handful of people, PERE understands that it will be supported by the firm’s private real estate funds management, legal and research functions.
The move is, in part, driven by the growing preference of the Asian investors to increase their global infrastructure allocation, given the stable and long-term income streams offered by the asset class. According to one of the sources, this strategy would also help to tap Chinese investors’ overseas investment appetite by directing some of their capital into international infrastructure deals.
While outbound deals in real estate, listed as a ‘restricted sector’ by Chinese regulators, continue to be deeply scrutinized, more strategic investments tied to China’s ambitious ‘Belt and Road’ global infrastructure initiative are being encouraged.
Asia and Europe will be ARA’s target investment markets for infrastructure deals, PERE understands.
ARA’s decision to foray into infrastructure investing is part of the Singapore-headquartered manager’s aggressive global expansion strategy involving a push into new geographies, asset classes as well as product types.
Earlier this month, the firm, which has so far focused on investing within Asia-Pacific real estate markets, announced its expansion in Europe with the appointment of Mark Ebbinghaus as a senior adviser.
Ebbinghaus, formerly the global head of real estate and global head of industries at Standard Chartered Bank, will be based in London and has been charged with the responsibility of “driving ARA’s business expansion initiatives in Europe moving forward in the form of REITs, private funds and other fund management-related platforms via merger and acquisitions”, according to John Lim, the firm’s group chief executive officer.
Talking about the Europe strategy, Moses Song, group chief investment officer at ARA told PERE that the firm is looking to tap on both the local European capital as well as facilitate cross-border investments from Asian capital. “Having a team on ground will also help us take advantage of the growing Asian investors’ demand for investing in Europe,” he said.
Song added that the firm will be looking at expanding its presence in Europe through M&As or platform acquisitions, in addition to standalone real estate transactions.
One early transaction that will see the firm’s exposure to European markets increase was its purchase of a 19.5 percent stake in Cromwell Property Group, the Australian real estate investment manager. Cromwell runs a number of European strategies, including private funds and REITs, which are responsible for approximately €4 billion of assets.
On the choice of London as its European base, at a time when some financial institutions are opting to move their headquarters out of the city into other European cities, he said:
“With our decision to be in Europe, we are looking to identify locations or jurisdictions where we think an independent, self-sufficient business can operate and thrive,” he said. “London is still relevant to the rest of Europe. Having an investment management platform there suits our needs going forward for managing our business. Eventually, we may end up in multiple cities depending on the opportunities.”
ARA’s ambitious plans to become a global real estate fund manager have been put in fast motion after the completion of its privatization process last March. A consortium led by the global private equity firm Warburg Pincus, Chinese investment and trust manager AVIC Trust and ARA’s management now owns the firm.
ARA’s co-founder Lim has lofty goals for his real estate conglomerate, which include increasing its assets under management from S$40 billion ($30.5 billion; €24.6 billion) to between S$80 billion and S$100 billion in just five years, the industry veteran told PERE in an interview last year.