Colony and Abraaj: who, what, when, where and why?

Colony Capital confirmed on Thursday it will acquire a large chunk of Abraaj Group’s fund management business and stakes in some of its funds.

Who?

Colony is a real estate specialist founded by real estate mogul Tom Barrack. The firm is better known for transactions such as taking over a $1.3 billion hotel portfolio from Goldman Sachs and bidding on film production firm The Weinstein Company. In 2016 it gained secondaries expertise by acquiring NorthStar Asset Management. Colony executives told sister publication PERE in December the firm was looking at complex secondaries deals such as real estate fund restructurings. Barrack himself has strong ties to the Middle East and is reported to have raised sizeable chunks of capital from the Gulf, which could explain why Colony is on the buyside of the Abraaj deal. Colony boasts offices in 18 cities globally, including a Beirut outpost and two in Asia. 

What?

Colony has acquired management teams and limited partner stakes in some funds in four regions: Latin America, sub-Saharan Africa, North Africa and Turkey. These include the 2014-vintage $526 million Abraaj Turkey Fund and the 2013-vintage $926 million Africa Fund III. The firm will also provide “interim support” to other legacy funds not in those regions, but it is not clear what form that will take.

When?

Abraaj has been trying to offload its general partner commitments to several of its funds since last year. Firms including HarbourVest Partners and other large secondaries buyers have looked at limited partner stakes and attempts at a stapled deal process towards the end of last year fizzled out. In February revelations that four LPs in its Global Healthcare fund had hired an auditor to examine the alleged misuse of capital brought it into the public eye. Colony was first linked to the deal in May, with TPG and Cerberus Capital Management also reported as contenders for different segments of the business.

Where?

Colony, which is based in Los Angeles, has said that Abraaj teams responsible for managing funds in the four regions will be brought under its roof. What happens to team members not included in the deal is unknown. Colony’s asset management experience is predominantly in the US, not emerging markets. The move may lay some groundwork not just for geographic diversification, but expansion of its real estate, healthcare and industrials remit to Abraaj’s other favoured sectors such as education, agriculture and manufacturing.

Why?

This is a trickier question to answer, at least for the time being. The official statement from the two firms speaks only of saving Abraaj, rather than how the group fits into Colony’s strategy. Of course, more assets mean more management fees, which are always welcome at listed investment firms. Numbers have not been disclosed, but a back-of-napkin calculation suggests Colony will be taking on at least $1.5 billion in assets under management, according to PEI data.

It is not unheard of for Colony to make opportunistic investments outside its real estate sweet spot, such as the aforementioned Weinstein deal. Curiously, in Thursday’s announcement Colony made no mention of property, describing itself instead as “an investment firm with significant holdings in the healthcare, industrial and hospitality sectors”. Could this be a hint of further diversification to come?

Write to the authors: toby.m@peimedia.com  carmela.m@peimedia.com  adam.l@peimedia.com

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