Ares to Enter Japan as APAC Expansion Continues

NYSE-listed Ares Management is expanding its footprint in Asia with plans to establish an office in Japan next year, as it moves to explore real estate and buyout opportunities in the country.

A representative from Ares confirmed to Mingtiandi that the US fund management titan will establish its next base of operations in Japan, with the move reportedly having been under consideration since at least August of last year.

Ares chief executive officer Michael Arougheti had first revealed the news earlier in the week in an interview with Nikkei Asia. “We expect to open our office here in Tokyo in 2024,” Arougheti said. “I believe there is probably a more robust private equity and real estate opportunity here in Japan than credit.”

With $12.2 billion in assets and around 555 employees across APAC, the base in Asia’s second largest economy will increase Ares office count in the region to ten locations, with the company already established in mainland China, Hong Kong, Singapore, and Korea.

Asian Market Expansion

Arougheti’s nod to Japan’s near-term promise for Ares’ private equity and real estate strategies points to one of the world’s largest private credit investors adjusting its approach to fit the Japanese market.

The firm’s third quarter results show that assets under management for Ares’ credit strategy amounted to $268.9 billion at the end of September, over twice as much as the combined holdings of its $34.3 billion private equity strategy and the $63.9 billion in AUM for its real assets division.

With a new Tokyo office on the way, Ares is continuing to grow its presence in Asia after the firm completed the acquisition of Singapore-based private equity firm Crescent Point Capital in July. The company had ramped up its Asia operations in January 2020 when it secured a controlling stake in Hong Kong-based SSG Capital Management, which was then renamed Ares SSG, and later came fully under the Ares Management identity.

In addition to its APAC buyout strategy, Ares made its first direct investment in Hong Kong real estate in September of last year when it purchased a 51 percent stake in a Kowloon office project from local builder New World Development for HK$3.07 billion (now $393 million).

Seven weeks before the Hong Kong investment, Ares appointed Bryan Southergill, a former KKR executive, to lead the firm’s real estate business in Asia.

Aside from real estate, Ares closed its sixth Asia special situations fund in October at $2.4 billion, including a sidecar vehicle, according to the company’s third quarter earnings call. The 2022-vintage strategy targets distressed sales in China and India, thanks in part to a $75 million commitment from the Colorado Public Employees’ Retirement Association.

New Operations in Japan

Ares’ decision to open a new office in Japan aligns with a series of moves by some of the world’s largest fund managers to boost their presence in the country.

In July private equity firm Warburg Pincus enhanced its presence in the Land of the Rising Sun and reconfigured its Asia leadership by appointing Takashi Murata as head of Japan and co-head of Asia real estate, with that appointment set to take effect in early 2024.

Goldman Sachs also appointed a new leadership group for its Japan business in November, according to Bloomberg. The shift saw the investment bank’s long-time president of Japan, Masanori Mochida, stepping down and a squad of five younger executives promoted to lead in what is seen as a period for growth by global investors in the country.

Apollo Global Management also announced in December last year that it had appointed former Citigroup Japan chairman Tatsuo Tanaka as the new chair for its business in the country.

With the island nation benefiting from low interest rates, and with the yen having slid against the US dollar, fund managers have been scooping up assets in the country, with Blackstone last week having finalised a deal to acquire a Kyoto hotel from Goldman Sachs for a reported $54 million.

In August, UBS Asset Management launched a multi-family development project in east-central Tokyo that is estimated to be worth $230 million once completed. The Zurich-based firm said that the project in Koto ward will have 563 units across 18 floors on a 7,000 square metre (75,347 square foot) site, making it UBS AM’s largest rental residence effort in Japan.

Investment in commercial property in Japan surged 40 percent to JPY 2.7 trillion in the first nine months of this year, at the same time that it fell 50 percent worldwide, according to a recent report from JLL.