ARA Asset Management has taken a majority stake in London-based non-bank lender Venn Partners LLP, as the Singapore-based company branches out into real estate debt opportunities.
The Warburg Pincus-backed fund manager said in an announcement today that it will provide cornerstone investment and working capital to drive the expansion of what is now called ARA Venn in real estate-backed credit markets in the UK and Europe, while also planning to expand into new geographies in the future.
Mingtiandi understands that ARA acquired the majority shareholding in Venn, which has assets under management and investment mandates worth more than £5 billion ($6 billion) in Europe and the UK, by purchasing a stake held by departing corporate investor Siem Industries, as well as smaller stakes held by a number of undisclosed partners.
ARA confirmed that, while the firm helmed by veteran investor John Lim will hold a majority of the board seats, the company intends to keep Venn’s underlying business and management intact, while using its global muscle to bring in new capital partners.
Following the acquisition, Venn’s existing management team, led by managing partners Gary McKenzie-Smith and Paul House, continues to own a significant stake in the business.
ARA is making the acquisition eight months after it forged an equity fund management partnership in the UK with London-based Dunedin Property Asset Management. The joint venture, now known as ARA Dunedin, has a mandate to invest in property assets in the United Kingdom.
Building an Armoury of Debt Funds
The Singapore-based fund manager said ARA Venn will build on the London-based lender’s existing capabilities to “create and manage funds and other investment vehicles to invest in a range of credit strategies in the commercial and residential real estate sectors”.
With over a decade’s worth of experience in debt deals, Venn has completed over €2.8 billion ($3.1 billion) in commercial real estate lending focusing on value add strategies, and has an investor base that includes pension funds, insurers and financial institutions.
Venn is also the delivery partner for a £3.5 billion UK government-backed lending programme for private sector rental housing projects. Just four months ago the London-based lender sold a majority stake in its Dutch mortgage platform Venn Hypotheken to local asset manager NN Investment Partners for an undisclosed amount.
Betting on Real Estate Debt
After the company built a portfolio of $88 billion in global assets managed through six Asian-listed REITs and an array of funds, the acquisition marks ARA’s first foray into European real estate credit.
ARA Europe CEO Mark Ebbinghaus, who has now joined ARA Venn as chairman, says the venture into credit strategies is timely, given the present market instability.
“In the current and likely near term volatile market environment driven by reactions to the global pandemic, the real assets credit market is viewed as a positive space to be in, particularly for participants with committed undeployed capital, and those with established track record managing government programmes,” Ebbinghaus said.
Venn’s joint managing partner and head of residential, Gary McKenzie-Smith, explained that capital partners often view real assets credit as being more defensive than corporate credit because the debt is asset-backed – in this case with the loan secured by property.
Taking on Europe Despite Crisis
ARA is expanding its European presence, which was established in 2018 when the firm set up its European desk under Ebbinghaus, despite the disruptions caused to the global property market by the pandemic.
“The private credit market in which we operate isn’t as exposed to the general volatility in the markets – there is a cushion – but we’ll have to see where the marker re-sets,” said Venn’s joint managing partner and head of commercial real estate, Paul House, who added that expectation would be for a modest reset provided that the restrictions caused by the pandemic are reduced by the time that summer arrives in Europe.
The disruptions to the market are already reported to have had an impact on ARA’s dealmaking, with Bloomberg reporting last week that the fund manager had decided not to pursue a deal to acquire a 50 percent stake in a £900 million London mixed-use development.
ARA is said to have been intending to acquire the half-stake in the Nova development from Canada Pension Plan Investment Board (CPPIB). A source close to the cancelled deal indicated to Mingtiandi that ARA’s capital partner had changed its mind following the outbreak.