Any firm seeking to be part of Asia’s nascent core real estate market will no doubt be running the rule over Aviva Investors’ platform in the region.
The approximately 30-strong operation, led by chief executive officer Ian Hally, was put in play at the end of last year via property broker Jones Lang LaSalle (JLL).
Neither Aviva nor JLL would comment on the sale. However, PERE understands the platform, which has one pan-Asia property fund and various direct mandates and joint ventures on its books, is unlikely to command a high price, if it commands a price at all.
In any event, a return is not the seller’s objective. Moreover, it would represent one small part of Aviva’s wider plans to rid itself of what group chief executive Mark Wilson described last month as “low-margin, underperforming or non-strategic businesses” in an effort by the UK life insurer to turn itself around following years of declining fortunes.
In June 2012, Aviva instigated a strategy to streamline its activities with a view to regenerating shareholder returns. Sifting through its £246 billion (€293 billion; $407 billion) Aviva Investors business was a major component of that. The strategy is proving to be working, with its 2013 results soundly beating analyst consensus. Accordingly, its share price has increased more than 90 percent since the strategy was first announced.
Surplus to requirements – unlike Aviva’s European and multi-manager real estate businesses – the Asian platform presents an opportunity for another asset manager harboring aspirations for a presence in Asia’s core property markets. The successful suitor would land a team working in Singapore and Sydney and assets under management in Australia, New Zealand and Japan. On its books is the Asia Pacific Property Fund, a pan-regional, open-ended fund launched in 2008 and currently holding £206.3 million (€245.9 million; $341.5 million) in assets.
Beyond that, there are various strategic partnerships, most notably in Australia, where Aviva teamed up with local developer and manager Mirvac for logistics investments and acquired A$350 million (€230 million; $320 million) of assets. In Japan, it raised ¥25 billion (€177 million; $246 million) in partnership with Secured Capital for a core-plus club fund to make investments in Tokyo offices.
Aviva has long been an active investor in its real estate investments. However, according to one source familiar with the business, it is reluctant to capitalize further outlays in light of the impending sale. “To grow that business, it needs co-investment capital, and my understanding is the life company is not willing to provide that,” he said.
A broker with knowledge of the sale said the “process went pretty wide,” adding that “one or two groups” already are in discussions with Aviva over a potential handover. Whichever firm ultimately adopts the business, Hally and his team will be hoping it has deep enough pockets to get the platform moving once again.