14 February 2022
Canada’s Manulife Investment Management has agreed to acquire a significant minority equity position in Hong Kong-based Arch Capital Management, a private equity firm focused on real estate in Asia Pacific.
Myron Zhu, head of private markets for Asia at Manulife Investment Management
Once the deal gains regulatory approval, it will combine Arch Capital’s experience in opportunistic and value-add strategies with Manulife’s $2.9 billion in core and core-plus assets across the region to create a partnership managing more than $5 billion in assets across 12 Asian markets.
Toronto-based Manulife has been rapidly expanding its real estate business in Asia and globally, including with the late-2020 purchase of a large stake in Swire Properties’ Cityplaza One in Hong Kong and last year’s appointment of Christoph Schumacher as global head of real assets for private markets.
“Arch Capital boasts a highly credible and experienced team with a long, established track record, and differentiated local presence in key Asia markets,” Schumacher said Monday in a joint statement. “This partnership further demonstrates our commitment to the fast-growing Asia region and will allow us to add even more value to our investors with broadened deal access, deepened investment management capabilities, and enhanced operational support.”
One Team, Two Entities
Chief executive Richard Yue set up Arch Capital in 2006 after pioneering fund investment in Hong Kong office properties during a career at AIG. His firm specialises in opportunistic, value-add and core/core-plus APAC strategies and has $2.3 billion in assets under management across commingled funds, separate accounts and joint ventures.
In a Monday interview with Mingtiandi, Yue and Myron Zhu, Manulife’s head of private markets for Asia, characterised the new partnership as “one team but two different entities”. In their joint statement, the companies highlighted that together the partners will deploy over 60 real estate investment and management professionals across the region.
Arch Capital founder and CEO Richard Yue
“Over time we’re looking for ways to really explore the synergy between the two teams, allow them to work side-by-side together and maximise the deal pipeline opportunities on behalf of the client and to provide better service for the client,” Zhu said. “One of the particular things we would like to leverage from Arch’s platform is especially their proven third-party client servicing platform, on top of their investment capability.”
Yue put the deal in the context of Arch Capital’s growing desire to take on stabilised core assets of the type that suits Manulife’s longer time horizon.
“We’ve been focused on the opportunistic side,” Yue said. “Over the years we’ve evolved, we’ve gone from pure opportunistic to opportunistic and value-add, and then a few years ago we started taking on core/core-plus mandates.”
What Arch Capital brings to the table is a client management skill set, the CEO said, “and together with Manulife’s humongous balance sheet and their increasing need as they’re growing their business to deploy capital, we are hoping that we can leverage on that and build a significant or meaningful business for them, together.”
Yue noted that the two partners have complementary geographic footprints, with Arch Capital active in Southeast Asia and Manulife investing largely in China and Japan.
Christoph Schumacher, Manulife’s global head of real assets for private markets
With Manulife poised to become the institutional investor in Arch Capital’s future strategies, the partnership will not alter the current management of the Hong Kong firm’s existing businesses, the companies said.
Manulife forged a similar deal in November 2020 when it acquired a minority stake in Albamen Capital Partners, a Hong Kong private equity firm focused on renewable energy, data centres and other power-intensive infrastructure assets in China.
As 2020 drew to a close, the Canadian group completed a transaction with funds managed by Gaw Capital Partners and Schroder Pamfleet to acquire Cityplaza One from Swire for HK$9.84 billion ($1.27 billion), with Manulife joining the deal as the biggest investor through its participation in the Gaw fund. The property was one of Hong Kong’s few major commercial assets to change hands in that pandemic-stricken year.
Manulife’s other partner in Cityplaza One, Schroder Pamfleet, is now branded in the region as Schroders Real Estate, with Schroders having acquired local value-add specialist Pamfleet in 2020, in the most recent previous example of a major global fund manager investing in a local private equity real estate firm.