Yep, if this is an AP-275 you can use a physical controller. The 650 will be able to terminate the AP-275 but will only support up to ArubaOS 6.4.x (in case you need to upgrade in the future...). So maybe a 7005 controller would be a safe bet.
If you wish to configure the 275 series as a standalone AP, then you would need to purchase the IAP-275 model. There is no way to convert the AP-275 into an IAP-275 version.