Aberdeen Standard Investments (ASI) announced on Monday that it has acquired Hong Kong-based Orion Partners for an undisclosed amount, adding the 19-year-old Asia-focused firm and its approximately $900 million of direct real estate investments in the region to the UK asset manager’s global business.
The transaction, which includes Aberdeen acquiring 100 percent of the equity in Orion Partners Holdings Limited and Orion Partners Services Inc is expected to augment ASI’s £49 billion ($62 billion) existing real estate portfolio, and is aimed at expanding the capabilities of the Edinburgh-based asset manager.
“For investors seeking diversification, Asian real estate offers attractive risk-adjusted returns, with less correlation to broader market volatility,” Hugh Young, ASI’s Head of Asia Pacific, said in a statement. Young pointed to rising global demand for alternative investment strategies in general, and real estate opportunities specifically, as drivers for the acquisition and an integral part of Aberdeen’s approach.
Aberdeen Adds to Asia Real Estate Arsenal
“Our real estate multi-manager business has invested with Orion Partners in Asia Pacific for more than a decade,” ASI’s Global Head of Real Estate Kang Puay Ju said in a statement. “It is a team we have known well and admired for its client-focused and transparent approach, much in line with ASI’s own culture.
Kang added that taking on board Orion’s direct real estate teams in Japan, Korea, Hong Kong and Singapore would allow ASI to enhance its insights into the local market while enabling the UK firm to broaden its range of products across the region.
Following the acquisition, Aberdeen indicated that their team will employ 300 real estate professionals globally, managing over 1,600 properties from 20 local offices, and will offer its clients investment opportunities in direct real estate, listed real estate, real estate multi-manager, and commercial real estate debt.
Orion Partners, which has been 25 percent-owned by French investment bank BNP Paribas since January of 2016, manages approximately $900 million in direct real estate investment in aged care, retail and office for institutional investors. The statement from Aberdeen did not mention the status of BNP Paribas’ holdings post acquisition.
While the 30-member firm does not release financials, it has maintained a “normal” credit status since its was founded in 2000, according to the NICE Korea SME profile for Orion.
Orion Cashes in on Asia Expertise
Orion’s real estate group has sponsored nine real estate private funds and separate accounts with interests in projects in Japan, Korea and Greater China. Last year Orion acquired the Platinum Tower office building in Seoul for KRW 214 billion ($190 million, according to a report by Savills and in 2017 the firm had purchased the MITAA Building in the city’s Gangnam business district for KRW 74 billion, according to a report by Cushman & Wakefield.
The company’s partners, John Lee in Singapore, Dennis M Smith in the US and Victor Kan along with C. Peabody Hutton in Hong Kong, started their real estate business in 2004, and have investment and asset management teams in Japan, Korea and China supported by regional fund, operations and administrations teams in Hong Kong and Singapore, according to their website.
The acquisition by Aberdeen comes shortly after the firm’s Tokyo-based partner, Steve Bass, who was responsible for Orion’s real estate business in Japan, joined AEW as that company’s country manager for Japan in January.
Fighting Passive Funds
Aberdeen’s acquisition of Orion comes as UK asset manager beefs up its direct-to-market offerings to reduce its reliance on traditional asset management, where fees continue to be driven down by passive funds.
The deal comes less than two years after the £11 billion ($14.2 billion) merger of Aberdeen Asset Management and Standard Life, which was necessary to compete against lower-cost index-tracking funds, co-chief executive Martin Gilbert told a media call quoted by Reuters in August of last year.
Profits dropped 12 percent year on year in the first half of 2018 at ASI, which has since then sought to divest lower margin businesses like its 200-year-old insurance unit, Standard Life Aberdeen, which it sold to Phoenix Group for £3 billion ($3.88 billion) last year. At the same time the company has worked to increase its exposure to sector-focused alternative asset managers.
A week ago the Scottish asset manager announced it would raise close to $1 billion in conjunction with Investcorp to invest in core infrastructure projects in Gulf Cooperation Council countries. It has also been a mere four days since the company announced a $228 investment in Bonaccord Capital Partners I LP, a unit that aims to buy stakes of up to 25 percent in 10 to 15 private-market managers, according to the Wall Street Journal.
In April of last year, the firm announced the formation of its European Residential Property Fund, aimed at investing euro 1 billion in housing in that continent over the next four years.